Josh Lerner has a new book out, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It. From the Freakonomics blog this damming bit of discussion:
When Australia legalized the venture capital limited partnership structure earlier this decade, for instance, legislators worried that foreign funds or firms might exploit the favorable tax treatment these entities enjoyed. So they required that each company backed by a venture partnership have at least half its assets in Australia. The venture funds found that this restriction handicapped the companies in their portfolio. The entrepreneurs could not expand their software development activities in India or their manufacturing operations in China without putting the venture funds’ tax status in danger, even as they competed against American ventures that made heavy use of “off-shoring.”
For ages, I have warned against such restrictions stifling innovation. Now our own policies are the poster-child of what not to do.