Evaluation and Comparison of the Optimality of Government Support Mechanisms for Knowledge-based Companies

Document Type : Scientific paper

Authors

1 economics-faculty of economics, management and administrative science - semnan university

2 post doc student of semnan university

Abstract

One of the requirements of leading the knowledge-based economy by relying on science production and commercialization is the provision of financial resources for knowledge-based companies. Considering the need for minimal and targeted government intervention and hidden behavioral issues such as adverse selection and moral hazard, this study analyzed the optimality of three funding mechanisms, including financing through the private sector, providing facilities, and support through the payment of subsidies to venture capitalists. Using the information available in 2020 and inspired by the study of Lach et al. (2020), the present research simulated the model for Iran. The results showed that the highest level of social welfare is related to the support of entrepreneurial projects through a contract with the minimum participation of the knowledge-based company in the commercialization of the product from internal sources and receiving the facilities with the maximum loan rate. The support mechanism through the subsidy payment to venture capitalists is second in terms of welfare. The government promotes the growth of knowledge-based companies by providing financial resources and incentives to venture capitalists. Government support through providing a contract with maximum participation in financing and receiving facilities with a minimum loan rate and the private venture capitalist’s aid are ranked third and fourth in welfare, respectively. By choosing the optimal policy, the government can improve the welfare state and provide intelligent support for knowledge-based companies.

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References

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Macroeconomics Research Letter
Volume 17, Issue 34
September 2022
Pages 87-111

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History

  • Receive Date: 06 August 2023
  • Revise Date: 20 September 2023
  • Accept Date: 25 September 2023

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