ECONOMICS:The Problematic Venture Capitalist

doi:10.1126/science.287.5455.977

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Policy Forum

ECONOMICS:
The Problematic Venture Capitalist

Josh Lerner

The federal government has actively financed new firms, particularly in high-technology industries, for several decades. The U.S. Congress is now reconsidering the largest such program, the SBIR program. Although the program has enjoyed some successes to date, efforts to make the program permanent and expand its size are problematic. First, the venture capital industry has dramatically expanded since the program's enactment. Second, like similar efforts, the program has been subject to distortions in awardee selection. These concerns suggest that the program should continue to be temporary, with the burden of proof on those who wish to continue the program.

The author is at the Harvard Business School, Morgan Hall, Boston, MA 02163, USA, and an affiliate of the National Bureau of Economic Research, Cambridge, MA 02138, USA. E-mail: jlerner{at}hbs.edu

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