A Study on the Effectiveness of the Venture Capital Market Intervention Policy: The Case of the South Korean Government

This study aims to empirically examine the role of government intervention in the venture capital environment in South Korea. The study conducted a literature review on government interventions in the venture capital ecosystem. For empirical analysis, annual data from the Korea Venture Capital Association and the Korea Fund of Funds from 2004 to 2021 were analyzed using time-series statistical methods and macroeconomic analysis. The literature indicates that government policy intervention in the venture capital ecosystem can be divided into direct, indirect, and temporal approaches. The direct approach includes both direct and indirect government investments. The case study shows that the Korean government primarily engages in indirect investment in private venture capital funds. The time-series analysis found that early-stage investments increased with a higher proportion of early-stage investment funds and preferred stock investments, whereas an increase in total venture fund formation led to a decrease in early-stage investments. Based on the findings from the case studies and empirical analysis, policy recommendations for indirect government intervention were proposed.