The innovation and performance impacts of venture capital investment on China’s small- and medium-sized enterprises

Xiuping Hua, Yali Wang, Miao Wang

    Research output: Journal PublicationArticlepeer-review

    3 Citations (Scopus)

    Abstract

    This study examines the impacts of venture capital (VC) on performance and innovation of China’s small- and medium-sized enterprises (SME). Using unbalanced panel data of 2699 VC-backed and non-VC backed firms in China’s pilot over-the-counter equities market, namely the National Equity Exchange and Quotation (NEEQ) market, during 2005–2014, we find that venture capital financing not only spurs innovation in the Chinese market, but also exhibits significantly positive impact on financial performance. Empirical evidence reveals that syndication of venture capital investment as well as the reputation of venture capitalists helps to create value for VC-backed firms. However, no evidence is found that foreign VC-backed firms perform better than domestic VC-backed ones. The results are robust to a variety of specifications. Our findings imply that the VC financing is an effective channel to promote the development of SMEs at China’s multi-layer capital market and syndicated VC investments and venture capitalists with high reputation shall be encouraged to play a bigger role in nurturing innovation and entrepreneurship in the future.

    Original languageEnglish
    Pages (from-to)167-185
    Number of pages19
    JournalChina Economic Journal
    Volume9
    Issue number2
    DOIs
    Publication statusPublished - 3 May 2016

    Keywords

    • Venture capital
    • firm value
    • innovation
    • patent
    • research and development

    ASJC Scopus subject areas

    • Cultural Studies
    • Sociology and Political Science
    • Economics, Econometrics and Finance (all)

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