Indigenous Firm Performance in a Small Late Developing State : A Case-study of the Role and Contribution of Public Venture Capital in Ireland.

Buckley, Anthony Paul (2013) Indigenous Firm Performance in a Small Late Developing State : A Case-study of the Role and Contribution of Public Venture Capital in Ireland. PhD thesis, Lancaster University.

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Abstract

Domestic market size constraints in small late developing states are expected to influence the economic growth process in general and indigenous firm performance in particular. The role and contribution of policy-makers in overcoming these constraints can therefore be significant. This thesis evaluates the role and contribution of public venture capital - as a significant industrial policy initiative - to shareholder value creation in growth-oriented indigenous firms in Ireland. Three main themes are investigated. Firstly the rationale and context for micro-level industrial policy interventions in Ireland is considered. Secondly, the role and contribution of public venture capital to indigenous firm performance and thirdly the factors differentiating between performing and non-performing firms are explored. Using mixed methods research this study finds that in a small late developing state such as Ireland, 'job creation' has been elevated from an industrial policy perspective to the de facto national objective. Enterprise policy development for indigenous industry however remains largely emergent and fluid, fifty-four years on from the advent of the national export-oriented industrial policy. In the absence of a deliberately-stated enterprise policy, this emergent micro-level approach has led the states' economic development agency into areas outside its originally intended remit. This goes some way to explaining the plethora of micro-level policy instruments available in Ireland to growth-oriented indigenous firms. Further, this study also finds no conclusive evidence that an 'equity gap' existed in the analysis period. However, as a consequence of attempting to close this perceived gap, the Irish state now finds itself with an investment portfolio of over nine hundred direct share investments in indigenous firms. The Irish State, through its economic development agency, has thus become the largest venture capital company in Europe. The portfolio of state-selected firms in the analysis (n = 51) for public venture capital investment are found not to perform as anticipated by the theory of change mapped out in the study. A quantitative model developed for the study also finds that there is no statistically significant association between firm performance as measured in the study and the value of the public venture capital invested in each firm. The crosscase and contribution analysis in the study further confirm that the contribution of public venture capital to indigenous firm performance in Ireland was marginal at best. The primary barrier to profitable growth for the indigenous firms receiving public venture capital support in the analysis period was the firms 'Limited endowments of managerial resources' (Penrose, 1959) to manage the growth process and not a lack of risk capital as perceived by agents of the State. Policy implications of the findings are also considered in the study.