The Impact Of Venture Capital On Firm Technological Innovation

As China is attempting to build an enterprise-led,market-guided innovation technological system that integrates the inputs of enterprises,government-run research and development institutions,and higher education institutions,it places emphasis on the critical role of venture capital in spurring technological innovation.At the same time,product market competition,marketization process and government subsidies represent the macro-,meso-,and micro-level factors,respectively,that can affect the working of all enterprises.However,whether venture capital indeed boosts innovation for enterprises is still understudied.In particular,it is merited to further investigate whether these macro-,meso-,and micro-level moderators potentially change the relationship between venture capital and firm innovation.In this sense,findings of this study have significant implications for policy makers to formulate effective innovation policies,optimize innovation environment and promote innovation development.Specifically,based on the resource-based theory and agency theory,this study examines the relationship between venture capital and technological innovation,and whether the impact of venture capital on technological innovation will be further dependent on the levels of product market competition,marketization process and government subsidies,respectively.These key factors constitute important boundary conditions which may change the relationship between venture capital and firm technological innovation.In this sense,the findings of this study can help us gain a more refined understanding of the venture capital-technological innovation link,which enriches the relevant research area and can better inform practice.Using the mixed cross-section data of GEM listed companies from 2009 to 2015,the author finds that compared with the enterprises without venture capital support,the enterprises with it have greater innovation input and output,and that the intensity of venture capital support is also positively associated with innovation input and output.Second,it is further found that the increase in product market competition enhances the relationship between venture capital and technological innovation.Third,the increase in the degree of region-specific marketization process makes the relationship between venture capital and technological innovation more pronounced as well.Additionally,government subsidies also strengthen the positive effect of venture capital on technological innovation.This study reveals the complicated relationship between venture capital and technological innovation and three key boundary conditions,which constitutes a multi-level theoretical framework and sheds light on the relevant research area.Findings of this study also provide important managerial and policymaking implications for spurring innovation and enhancing competitiveness of Chinese enterprises.