Külgazdaság Vol. 7-8/2020

Innovative companies – innovative investors

Western experiences of equity market for startups


In addition to traditional venture capital funds, business angels, business accelerators and incubators, as well as crowdfunding platforms play an important role in financing startup companies. As these market players are relatively new, little experience has been gained with their operation. It is not yet known whether the market reorganization between players in this capital market will prove to be lasting, especially in view of the unfolding global recession in connection with the spread of the COVID-19 pandemic. However, learning from experience can be beneficial to less developed regions for the creation and successful expansion of startups using alternative sources of capital and associated technical support, networking, market knowledge and men­toring. The article provides an overview of the functioning and development trends of the new institutions providing equity financing, including their cooperation and competition, as well as their impact on the sponsored businesses. The trend so far indicates a decline in the importance of traditional venture capital funds in financing startups and early-stage companies, as these funds increasingly turn to larger-scale investments by more mature companies. This process has been accompanied by a stronger emphasis on the participation of large corporations in markets in many forms, the increasing role of institutionalized business angels, business accelerators and incubators, and the development of crowdfunding platforms providing capital through community funding. An important lesson is that successful former startup founders, utilizing their experience and wealth, play a key role in the preparation and execution of capital investments in startups in all types of alternative capital organizations. Thus, the successful development and capital supply of startups are becoming the result of a self-reinforcing process.

Journal of Economic Literature (JEL) codes: L26, G20, G23, G24.

Keywords: Entrepreneurship, Startup, Equity finance, Venture capital, Business Angel, Accelerator, Crowdfunding.

The European Union and China: conditions of the balanced trade relationship


China is one of the dominant trade partners of the European Union, however, the risks and geopolitical concerns of economic relations have come recently to the fore in the EU’s trade strategy. In this study, multivariable linear regression is applied based on the data of OECD countries to reveal the factors which can help to avoid the import exposure from China. The analysis of the period between 1992 and 2018 confirms the impact of factors which are considered decisive for import exposure in the relevant literature. The number of free trade agreements and the growth rate of medium and high-tech products compared to the total industry show the highest explaining power. The lesson of this analysis is that on the one hand, the EU should insist on rule-based free trade relationships despite the current worldwide protectionist trend. On the other hand, a successfully implemented industrial strategy has crucial importance for the balanced trade relations with China.

Journal of Economic Literature (JEL) codes: F13, F14, O24.

Keywords: European Union, China, trade, import exposure.

The Brazilian Variety of Capitalism


The article analyses the major institutional spheres of the Brazilian market economy and the interrelationships between their elements based on the approach of the Varieties of Capitalism (VoC) school. For a better understanding of the path dependent nature of the Brazilian economy, the firm-centred perspective of the VoC is embedded in the analysis of the political system, and changes in the economic role of the state are also considered.

The case study analysis of the Brazilian market economy and its operational logic within this extended theoretical framework offers a novel approach in the domestic and international literature and results on the formulation of novel theoretical and practical insights regarding Brazil’s development path and in more general terms late comer emerging economies and the middle income trap.

The election of the radical far-right president, Jair Bolsonaro by the end of 2018 can be explained by one basic message: the promise of change. In contrast to this, according to the main argument of the paper the basic mechanisms of the Brazilian market economy are dominated by state guidance, hierarchical structures and informal relations that are long-standing and stable features. The objective of the study is to prove that these unique operational logics and principles have been sustained even during the decade of the social developmental state in the 2000s and have not been substantially changed during the years of the (neo-)liberal economic policy turn starting in 2012. The elitist, hierarchical and informal relational organization of the Brazilian market economy is expected to be further strenghtened in the light of recent political and economic changes.

Journal of Economic Literature (JEL) codes: O10, O54, P16.

Keywords: Brazil, Varieties of Capitalism, system paradigm, developmental state, middle income trap, path dependency.

Legal challenges of the retention of worker status as reflected in recent case-law of the Court of Justice of the European Union


In recent years, a growing number of cases related to the retention of worker status have em­erged in CJEU jurisprudence with reference towelfare benefits, requiring a much deeper analysis of the field treated earlier as peripheral. Such an analysis seems especially justified in the light of the current political and legal discourse concerning the issue of free movement, focusing on the question of equal treatment in the field of welfare assistance for mobile citizens. The purpose of this study is to present and put into context the relevant case-law of recent years by analysing the judgments of the CJEU in two cases that are benchmarks in this field: the Tarola and Saint Prix cases. Both cases highlight the key role that economically active status continues to play in integration law. These judgments also shed light on the challenges arising from the difficulties in distinguishing between the economically active and inactive EU citizen statuses. This issue emerged as an increasingly grave problem in the field of law of free movement, posing a serious dilemma for law enforcement.

Journal of Economic Literature (JEL) code: K31 Labor Law. Keywords: retention of worker status, equal treatment, welfare benefits, free movement of wor­kers.

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