Venture capital financing in the Thai economy.

3. Channel risk capital investment in R&D innovations (to turn R&D into innovation).

To enhance the efficiency of the VC process, SME Bank VC Corporation needs to employ a new management approach of intellectual property (IP) portfolios and VC pipeline (research projects with commercial potential for the production scale set up for technology transfer). A value chain of R&D activities should be created to support the progress of research outcomes towards commercial innovations. The VC pipeline efficiency needs the interorganisational interactions that contribute to the creation of technologies along the value chain process. As a public venturing mechanism, SME Bank VC Corporation needs to play an active role in financing new businesses in high-technology industries, providing them with diversified and complementary financial services to help VC-backed businesses succeed. In stimulating innovation and economic growth, SME Bank VC Corporation would function as a one-stop centre to help technology-based businesses in their business plans, training, human resource development, moving up the value chain.

MANAGEMENT IMPLICATIONS AND CONCLUSIONS

This paper is concerned with the management of venture capital financing in the Thai economy. It presents the Small and Medium Enterprise Development Bank of Thailand (SME Bank)'s activities in supporting the generation of new businesses and innovations. SME Bank has taken high risks on start-up ventures in the technology sector to support the diffusion and commercialisation of innovations which would help induce economic growth and development. With the government policies to support technology innovation of SMEs, SME Bank currently considers the challenge of setting up SME Bank VC Corporation, a separate VC arm of SME Bank, to support VC-backed businesses in creating the tech economy. Managerial and technological implications on the attempts of SME Bank in moving towards technology bank are as follows:

* 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. TABLE 1: SME BANK'S COMMITMENT TO NATIONAL STRATEGIC CLUSTERS Projects Aims/Objectives Kitchen of The project promotes food industries, for which the World Thailand possesses high competitive potential in

the global market, owing to rich agricultural land

and favorable climate for farming, fishery,

husbandry, as well as great biodiversity and local

wisdom in the processing of her produce. World Tropical The project encompasses three business clusters of Fashion textile and garments, leatherwear and footwear, and

gems and jewelry, to promote Thai brands of fashion

goods, and fashion design businesses. Tourism Capital The project aims to promote tourism and Thailand's of Asia strategic position from sub-regional level to

regional level, through co-operation with allies

such as China and Japan to brand Thailand to the

global public. New services are being offered such

as long-stay resorts, world-class hotels, spas, and

golf courses targeting high-potential travelers, a

distinctly different approach to the mere promotion

of scenic spots in the past. Detroit of Asia The project aims to promote Thailand as Southeast

Asia's automotive manufacturing hub. World Graphic The project aims to create highly skilled workforce Design Centre in information technology (IT) including software

programmers and hardware parts and components

developers. Source: SME Bank. FIGURE 3: INFLUENTIAL FACTORS IN THE PROCESS OF TECHNOLOGY COMMERCIALISATION Factors Number Others 9 Infrastructure 51 Capable personnel 53 Tax benefits 55 R&D with commercial potential 55 Capital 61 Source: The Office of Small and Medium Enterprises Promotion. Note: Table made from bar graph.