Financing of innovation in the regions and the dynamics of the venture market considering the crowding-out and crowding-in effects of private investments under the influence of government subsidies and guarantees

Abstract

The article focuses on the quantitative assessment of the impact of government subsidies, guarantees, and tax incentives on the dynamics of regional venture markets, taking into account crowding-out and crowding-in effects of private investment. The aim of the study is to identify threshold values and institutional conditions under which government participation enhances rather than suppresses private venture capital activity and contributes to the formation of sustainable innovation ecosystems. The empirical base consists of panel data for 45 regions for 2018–2023, statistics from Rosstat, the Central Bank, and specialized associations, as well as financial reports from more than 1200 technological SMEs. The methodology includes panel data regression analysis with fixed effects, Difference-in-Differences, cluster analysis of regions, correlation analysis of support instruments and private investment, as well as lag analysis of high-tech export elasticity by various sources of financing. It is shown that in the leading regions cluster, every ruble of direct subsidies corresponds to 4.04 rubles of private venture investment with a positive EBITDA margin of portfolio companies (18.74%), while in the group of outsiders the private capital multiplier decreases to 0.39, and the average margin becomes negative, indicating the dominance of the crowding-out effect and the support of operationally unprofitable zombie companies. Correlation analysis demonstrates that at late stages of startup development, direct grants are associated with a negative response from private capital, whereas tax incentives and government guarantees show a consistently positive relationship with investment inflows and investor confidence indices. The comparison of projects with varying shares of government ownership revealed a nonlinear return profile: maximum NPV and share of successful exits are achieved with minority government participation (1–25%), while exceeding the threshold of approximately 35–40% leads to a sharp decline in IRR and market liquidity. The lag analysis revealed a short-term nature of the pure budgetary financing effect and increasing returns from private and mixed investments over a horizon of up to five years. It is concluded that emphasis should be shifted from direct subsidization to indirect and repayable instruments, program evaluation should be reoriented from disbursement volumes to private capital multipliers and portfolio company survival rates, and regional innovation policy should be differentiated considering the cluster heterogeneity of venture ecosystems.