Venture capital in an economy in transition

Abstract

For one aspect of economic development to occur-new venture creation-people, capital, ideas, and know how are needed. In terms of the capital need, venture capital frequently plays a significant role by providing the much needed capital for starting and particularly growing enterprises. Hong Kong is no exception, as venture capitalists have played a significant role in funding ventures not only in Hong Kong but also in the surrounding region. Since Hong Kong very early excelled in its entrepreneurial activities, venture capital firms were funding ventures in the 1970s before such firms even existed in other parts of Asia. Funding expanded to technology ventures and to a lesser extent other firms in PRC, Taiwan, Singapore, and Malaysia, being particularly focused on high technology firms in Beijing and Shanghai when conditions were not favourable for high-tech firm development in Hong Kong, interest particularly shifted to other areas of the region. Since the government is now interested in making Hong Kong an innovation and technology centre over the next decade, venture capital will play a very important role in this activity. This new role in Hong Kong will require a shift in the focus of some venture capital firms from short-term investments in established companies to longer-term investments in high technology start-ups.

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