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Weekly Updates* SME VC Bank Corporation represents a public venture capital (a contrasting model to US Silicon Valley with private sector-led VC initiatives) at the state level in helping start-up companies and taking them public. Although there is no government intervention in the US model, entrepreneurs in developing countries need the government gap funding programmes to compete in emerging industries. SME Bank VC Corporation can be seen as an efficient financing mechanism to assist high-technology industries in Thailand. It represents the role of the government in developing a VC market (acting as a major catalyst to accelerate the early stage investments in technology-based businesses). Nevertheless, the government programmes should be a complement to, not a replacement for, conventional equity financing. Indeed, the public funds should not crowd out private funds which might cause a reduction in overall industry returns. SME VC Bank Corporation needs to act responsibly to create positive impacts on the Thai industries. The government should encourage the private sector to take up venture capital investments to help businesses generate ideas and translate the R&D results into commercial outcomes.
* In the absence of private equity capital in Thailand, the government should play a dominant role in the venture capital market. The Thai government should take a number of steps to encourage investors to commit to the country's venture capital funds even though the return to the government is uncertain. The government should devote resources to science parks as policy instruments to promote research-based industrial capacity. The government role should also include facilitating and upgrading cluster development to strengthen the clustering effect. The adoption of cluster-based strategy would bring coordination to various funding programmes and activities that formerly operate in isolation and lack cumulative impact. The clustering effect would help stimulate the creation and growth of technology-based businesses, bring about the commercialisation of new technology and catalyse economic growth. In line with the government's cluster-directed policies, SME Bank VC Corporation should work with universities, research organisations as well as industries to build the science and technology infrastructure that brings new research ideas to the marketplace. For technological catch-up to encourage innovations, SME Bank VC Corporation needs a cluster development approach to grow and develop the VC market.
The findings in this paper suggest important future research on what should be the best VC management strategy to overcome obstacles of entrepreneurial start-ups and whether using active or passive venture management would resolve managerial problems and positively increase the performance of SME venture capital investments. In many developing countries including Thailand where the government (not the private sector VC funds) plays a major role in encouraging venture capital, the government may be the best to provide resources in advancing clusters. This would be an interesting research issue to explore the effectiveness of the government role in VC financing.
Acknowledgements
The author gratefully acknowledges the support of Mr. Chotisak Asapaviriya, SME Bank President; SME Bank management team; Prof. Henry Etzkowitz, Science Policy Institute, State University of New York; and Prof. Richard Nelson, the Earth Institute, Columbia University.
Received 9 March 2006
Accepted 16 May 2007
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JARUNEE WONGLIMPIYARAT
The National Science and Technology Development Agency
Ministry of Science and Technology
Pathumthani, Thailand
Endnote
(1) EVA (Economic Value Added) was developed by Stern Stewart as a measure of economic profit. EVA System is an integrated system of internal corporate governance, designed to create shareholder value by improving EVA performance. The EVA focuses performance measurement on the underlying economics of value and wealth creation.
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