COLUMBIA--The House approved a bill Thursday to establish a fund to encourage investment in companies that could develop into profitable businesses with high-paying jobs.

The House voted 100-0 to create the South Carolina Venture Capital Investment Act that offers tax credits to investors such as banks and insurance companies to guarantee repayment of loans that will be used to invest in businesses.

"We need to do what ever we can do to spur economic development," said Rep. Chip Huggins, R-Columbia, who was a co-sponsor of the bill.

The bill establishes a fund at the state Commerce Department that could borrow as much as $100 million. The fund would be administered by a board of seven people appointed by the speaker of the House, the Senate president pro tem and the governor.

The board would invest the money in venture capital companies that in turn would invest in startup businesses.

If the investments make money, the banks are paid back and no tax credits are used. If the investments lose money, the banks can deduct losses from their state taxes.

House Ways and Means Chairman Bobby Harrell, R-Charleston, said he expects the state to invest in companies that evolve from research in areas such as biotechnology, automotive and industrial engineering at Clemson University, the Medical University of South Carolina and the University of South Carolina.

Harrell and House Speaker David Wilkins, R-Greenville, who were the main co-sponsors of the bill, said the House also has approved a bill that gives the state's three research universities the ability to increase their research capabilities while focusing on adding to the state's economy.

"It fits quite nicely," Wilkins said. "We are optimistic it will promote investment, create capital and jobs." The venture capital bill is similar to programs in Iowa, Arkansas and Oklahoma.

Oklahoma's program is the only one that has been around long enough to measure its success, said David Barkley, an economics professor at Clemson University. The state is returning enough on its investments to be "self-supporting" and has not had to use any tax credits, he said.

In the first decade of the program, more than $84 million has been invested without using any of the tax credits authorized by the Oklahoma law. Barkley said it will take South Carolina at least 10 years to see any results.

Harrell says it's worth the wait.

"The nature of venture capital is that it takes a while to get the payoff and when you get the payoff it's huge," Harrell said.

The need for venture capital in South Carolina was highlighted by the Ways and Means Committee, which said figures show the state trails its neighbors in garnering private investment.

In 2000, $1.8 billion in venture capital dollars were invested in North Carolina and $2.5 billion in Georgia. That's compared with only $14 million in South Carolina, according to figures from the House Ways and Means Committee.

South Carolina tried several years ago to invest in startup companies with the Palmetto Seed Fund, but it was too small to have much of an effect, Barkley said. Under the new bill, that fund will be rolled into the Commerce Fund.

Barkley said it will take more than just dollars for South Carolina to make its program work. The state needs an entrepreneurial spirit, first-class universities and talented people to support the companies, he said.