Inside the black box of the government subsidy selection process

Abstract: New ventures and their positive effect on the economy and society have received great attention in recent decades by scholars and public policy makers. However, the prospects of new ventures are uncertain and most of them fail within a five-year period. This has led to governments all over the world developing subsidy programs to support new ventures' growth and development. Scholarly literature in the field has largely focused on subsidy programs effects on the economy or the effects the subsidy programs have on new ventures. However, despite the selection process being highlighted as crucial for successful allocation of public funds and is central in VC/BA literature, there is limited understanding about the government subsidy selection process. This study therefore aims to open the black box of the government subsidy selection process. To do so, this study uses a qualitative case study with semi-structured interviews to capture how and which signals influence external assessors of government subsidies evaluation of key criteria when evaluating innovative new ventures. This study shows three key findings: First, this study finds that the key criteria used in VC/BA including societal impact is for the most part applicable in the government subsidy selection process. Second, the findings further show that the evaluation of key criteria is influenced to different extents by signals of human capital, endorsement, language, and reliability. Finally, the findings show that the context of the selection process has a big effect on how and which signals influence the evaluation of key criteria. Findings from this study contribute to theory and practice as they provide new insights to the research field and increase the understanding of the government subsidy selection process.