THE IMPACT OF SUBSIDIZING EARLY YOUNG INNOVATIVE COMPANIES ON THEIR ACCESS TO CAPITAL MARKET

Sep 19, 2026

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Young Innovative Companies (YICs) face barriers to advancing projects because limited financial resources restrict their ability to reach capital markets. This study assesses whether public subsidies reduce these constraints, centering on the French Public Investment Bank’s (BPIFrance) Individual Aid program. Results show subsidies enhance YICs’ capital market access, chiefly by mitigating information asymmetry for investors. Market-wide private equity funding also strongly affects capital raised, while subsidy participation drives the probability of obtaining financing.

LanguageEnglish

CategoryPresentations

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Pages54

Reading Time19 min

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Abstract

Key findings

Mechanisms and channels

Scope and identification approach

Subsidy program description

N° 2025-7 THE IMPACT OF SUBSIDIZING EARLY YOUNG INNOVATIVE COMPANIES ON THEIR ACCESS TO CAPITAL MARKET ANNA MALESSAN [www.tepp.eu](www.tepp.eu) TEPP – Theory and Evaluation of Public Policies-FR CNRS 2042 The Impact of Subsidizing early Young Innovative Companies on their Access to Capital Market Anna Malessan 1 Latest Version May 19, 2025 Abstract Young Innovative Companies (YICs) face barriers to pursuing their projects due to limited financial resources and restricted access to capital. This study examines whether public subsidies help alleviate these constraints, focusing on the French Public Investment Bank’s (BPIFrance) Individual Aid program. The findings confirm that subsidies improve YICs’ access to capital markets, mainly by reducing information asymmetry for investors. Additionally, results show that the total available funds in the private equity market significantly influences the volume of capital raised, while participation in the subsidy program is the key factor determining the likelihood of securing funding. Key words: YICs, R&D investment, public subsidies, impact evaluation, access to capital market, causal channel, certification effect, prototyping effect JEL: D22, G24,G32,H29, O31, O38 1 Affiliation: Anna Malessan, University Gustave Eiffel, ERUDITE, TEPP-CNRS, visiting PhD candidate Pompeu Fabra University, [Email: anna.malessan@edu.univ-eiffel.fr. Personal website](Email: anna.malessan@edu.univ-eiffel.fr. Personal website here)[ here](Email: anna.malessan@edu.univ-eiffel.fr. Personal website here). I am incredibly grateful to Albert Ba˜nal-Esta˜nol, Philippe Gagnepain and Yannick l’Horty for their continuous guidance and support. I am thankful to Sylvain Chareyron, Fabrice Gilles, Ferhat Mihoubi and Maria Ptashkina for valuable comments and ideas; to Naomie Mihoubi, Elisa Navarra, Jason Sokin carefully reading the paper and providing precious suggestions. I thank the conference and workshop participants at Paris-East University’s Seminar, the 39th meeting of the European Economic Association, the 40th Journ´ees de Micro´economie Appliqu´ee, the 2024 International Conference on Empirical Economics hosted by Pennsylvania State University at Altoona, the 23rd Journ´ees Louis-Andr´e G´erard-Varet, The 71st Congress of the French Economic Association, the 2023 BSE Summer Forum-Innovation Workshop, and the PhD Seminar of Pompeu Fabra University. 1 Introduction Innovation from private companies is a significant driver of overall technological change, particularly through knowledge spillovers. Among firms, Young Innovative Companies (YICs), also known as startups, are believed to play a crucial role in this dynamic and so to be particularly relevant for growth and job creation (Criscuolo et al., 2014; Decker et al., 2014) . The importance of YICs is mainly attributed to their over-representation in the production of disruptive innovations (Schumpeter, 1942; Baumol, 2004; Schneider and Veugelers, 2010) . Disruptive innovations refer to those that create new markets or enter existing ones by replacing previously dominant products (Colombo et al., 2015) . In that sense, recent evidence from Kolev et al. (2023) suggests that patents filed by startups receive more than twice as many citations as those filed by incumbent firms over time, highlighting their relative importance for subsequent research.2 However, Young Innovative Companies (YICs) occupy a paradoxical position in the innovation landscape: while they are key drivers of technological progress, they also face significant challenges in conducting their Research and Development (R&D) activities. Due to their youth and inexperience, they often lack the necessary resources to advance their projects—a situation exacerbated by their constrained access to capital markets. Several factors contribute to this constrained access, includingthe absence of track records, insufficient tangible assets to serve as collateral, high levels

FAQs

What problem do Young Innovative Companies face in relation to capital markets?

They encounter barriers to pursuing projects due to limited financial resources and restricted access to capital markets, including information asymmetry and lack of assets to support collateral.

Which subsidy program is analyzed in the study?

The study focuses on the French Public Investment Bank’s (BPIFrance) Individual Aid program, examining subsidies allocated during 2010–2018.

How do the authors find subsidies affect access to capital markets?

Participation in the Individual Aid program improves access to capital markets, with results indicating that subsidies reduce information asymmetry for investors and increase the likelihood of securing funding.

Sep 19, 2026

Upload by Patrick