Effects of Last-stage Venture Capitals on Innovation Performance of Entrepreneurial Firms: Screening Effect or Value-added Effect

Abstract

Abstract:

At present, venture capitals mainly focus on last-stage entrepreneurial firms because of the following reasons:the wealth effect from IPO is much higher than the value-added effect from fostering entrepreneurial firms, there exists prevailing information asymmetry in the capital market, and intellectual property rights are not well protected. We firstly reveal the characteristic that venture capitals concen-trate on last-stage entrepreneurial firms; then analyze the reasons why venture capitals concentrate on last-stage entrepreneurial firms and elaborate the screening effect and value-added effect mechanism of last-stage venture capital on R&D and R&D performance; and lastly, examine the influence mechanism with difference in difference propensity score matching method based on entrepreneurial firms on the GEM from 2009 to 2014. The results show that before entering into entrepreneurial firms, last-stage venture capitals have prominently screening effect on R&D but have no screening effect on patent application; and after entering into the entrepreneurial firms, last-stage venture capitals have no value-added effect on either R&D or patent application.

Key words: venture capital, innovation, screening effect, value-added effect, difference in difference propensity score matching

Cheng Liwei, Zou Shuang. Effects of Last-stage Venture Capitals on Innovation Performance of Entrepreneurial Firms: Screening Effect or Value-added Effect[J]. , 2020, 32(1): 80-90.

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