The Impact Of Venture Capitalists On Venture Innovation Capability

Venture Capital has existed for over30years in China, during this period, VC is always playing an important role in Chinese enterprise’cultivation. Especially in recent years, Chinese government has put much emphasis on innovation and entrepreneurship, and launch series of policies to encourage entrepreneurship. Therefore, China’s venture capital industry has experienced a booming period, lots of local funds were founded, and more and more foreign venture capital entered China market. VC’s competition is unprecedented fierce, but it’s the golden time for start-ups. Financing has never been so easy, there are more choices for entrepreneurs, and can get financed by angel investors just with an idea. And for each round, financing size becomes bigger, current angel round is as big as A round in the past. However, just because of this, can ventures benefit from VCs on innovation? What kind of VC is the most helpful for ventures’growth? In what extent, should VC participate in venture’s management to make ventures more conducive? These are all important and serious questions for entrepreneurs to consider.Scholars have done considerable studies into the influence of venture capitals on startups. Venture capitals would not only provide fund to startups, but would also provide additional services to these companies through participating in the management team. Rather, the study on the relationship between venture capital and company innovation capability has not been thorough. This study innovatively uses use VC’s involvement into ventures’innovation. Moreover, this study uses the percentage of VC’s stock share and the percentage of VC’s board position to measure the degree that VC would like to participate into ventures; And selected VC’s reputation, network structure, and ownership property as VC’s capability; Besides, this study will also valid the moderating effect of VC’s characteristics to VC’s involvement on venture’s innovation.We have chosen the data of public companies listed between2009and2012on China’s Second-board Market to study VC’s function on venture’s innovation capacity. We find out that companies with venture capital investment is more likely to be more innovative, but the shares venture capitals hold is negatively related to companies’ innovation capacity, and the shares venture capital board hold is positively related to companies’innovation capability; Meanwhile, we have chosen all investment events occurred from2000to2012, and have used social network analysis to calculate VC’s network center degree. After the empirical analysis, we find VC’s share percentage has negative effect on venture’s innovation, but board involvement has positive effect on venture’s innovation. Besides, VC’s reputation and State ownership background have positive effect on VC’s involvement to venture’s innovation.