The Coalition Model
Entrepreneurs are agents of change, who contribute to growth at the levels of the firm, region, nation and international arenas. Small entrepreneurial firms have an important role in contributing to job creation, to generating technological innovation and to stimulating the United States economy. Unfortunately, there are many underlying challenges that the financing of young entrepreneurial firms present to prospective investors and innovators. Furthermore, there is a financing and information gap, which is termed the "Valley of Death." The Valley of Death describes the financial barriers of firms at the early-stage of technology development. Such difficulties are the product of the uncertainty, high-risk and information asymmetry problems, which preclude investors from backing such firms. Moreover, the markets for allocating risk capital to early stage ventures are inefficient for the reasons detailed in the paper. There is a need for the United States Government to intervene in the market and encourage the creation (and survival) of high-growth firms. This paper proposes a "Coalition" Model, which promotes governmental intervention in the market in the form of public-private partnership policies that will bridge the financial and information gaps, as well as encourage and stimulate the development of new technologies. ii The model proposes two targeted policy initiatives (strategic development tools) that can mitigate the financing challenges: the Incubator programs and the Match-Maker venture capital funds. The model's initiatives will be to complement, and not to replace, the private market efforts in financing emerging growth firms. The model allows the government to make direct equity investments in seed ideas and projects (Incubator) and in start-up firms and venture capital funds (Match-Maker), while also encouraging various private intermediaries to participate in the financings of the such projects. The initiatives are designed to ensure effectiveness and prevent political distortions based on the successful case studies of Silicon Valley and Israel. Another objective of the model is to join the calls advocating for a change in corporate governance philosophy from "shareholder primacy" towards a new philosophy of managerialism. The approach suggested in this paper is to incorporate the stakeholder approach to the traditional managerialism approach.
Hockett, Robert C.
Stout, Lynn; Barcelo III, John James
Doctor of Science of Law
dissertation or thesis