The Effectiveness of Government-sponsored Venture Capital Investors：A Comparative Study on Certification and Value-adding

Abstract

Abstract: As a policy instrument to promote entrepreneurship and innovation, government-sponsored venture capital investors (GVCs) are believed to help ease market failure, and contribute to the development of small and high-tech firms. This paper investigates the effectiveness of Chinese GVCs in promoting entrepreneurship and innovation by evaluating the certification and value-adding effects. Based on firms listed on the SEM (small and medium-sized enterprise) board and GEM（Growth Enterprise Market）during 2004-2016, our results show that, compared to private or foreign venture capital investors, firms funded by GVCs can obtain more outside financing from banks, government and institutional investors, but grow more slowly and have fewer innovation output. We also find a positive and significant impact of syndicated investments by investors with different ownership on firm growth and innovation output. These findings suggest that GVCs are better at certification but not value-adding, and syndication with other investors could combine certification and value-adding.

Key words: government-sponsored venture capital, syndicated investments, entrepreneurship and innovation, certification, value-adding

Peng Tao, Huang Fuguang, Li Ya. The Effectiveness of Government-sponsored Venture Capital Investors：A Comparative Study on Certification and Value-adding[J]. Management Review, 2022, 34(1): 26-36.

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