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The impact and mechanism of venture capital on the innovation performance of sci-tech enterprises: Evidence from chinese star market

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  • Li, Xiuzhen
  • Song, He
  • Zheng, Yingfei

Abstract

China's capital market has achieved prominent scale and depth, however, it still confronts huge challenges in sci-tech industry. In this context, China strives to conduct both fundamental and applied research, with an emphasis on science and technology innovation, to address the bottlenecks. Using data from China's STAR market from 2019 to 2023, this study focuses on the influence and mechanism of venture capital (VC) on innovation performance. We find that venture capital improves the innovation performance of sci-tech enterprises through two mechanisms: improving risk-bearing and mitigating financing constraints. Additionally, our further analysis indicates that VC's influence is particularly pronounced in enterprises with higher VC shareholding ratios, directors appointed by VC, VC syndication-backed enterprises, and enterprises in the eastern region. Our findings are robust after controlling sample selection bias or other endogeneity issues. Previous empirical analysis has demonstrated the significant role of VC in improving innovation performance in developed countries. This paper reconfirms this effect in sci-tech industries in the largest developing country, China. Moreover, our analysis reveals that the mechanism differs greatly from the case in developed countries, which enhances our standing of VC dynamics.

Suggested Citation

  • Li, Xiuzhen & Song, He & Zheng, Yingfei, 2025. "The impact and mechanism of venture capital on the innovation performance of sci-tech enterprises: Evidence from chinese star market," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001040
    DOI: 10.1016/j.pacfin.2025.102767
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    Keywords

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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