The Role of Government in Regional Technology Development: The Effects of Public Venture Capital and Science Parks

Policy makers around the world are anxious to find tools that will help their regions emulate the success of Silicon Valley and create new centers of innovation and high-technology. This paper uses an original county-level panel dataset to examine two common policy approaches intended to generate regional technology growth: "public venture capital" funds - direct government subsidies for small high-tech firms - to stimulate entrepreneurship, and science parks intended to lure high-tech firms. Using an instrumental variables approach, the paper finds science parks to have no impact on regional high-tech employment or private venture capital, while the Small Business Innovation Research Program - which proxies for public venture capital - also appears to have no impact on high tech employment and may crowd out private venture capital.