How Government Venture Capital Guiding Funds Work in Financing High‐Tech Start‐Ups in China: A ‘Strategic Exchange’ Perspective

Wang, Jinmin; Wang, Jing; Ni, Hua; He, Shan

doi:10.1002/jsc.1948

Cited by 10 publications

(7 citation statements)

References 31 publications

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“…First, the existing literature focuses on the performance of the GVC in developed countries, especially the United States, Canada, Australia, Israel, the United Kingdom, and Germany [23], while there are few studies on the performance of the GVC in developing countries. As China is a large developing country, the performance of the Chinese GVCGFs, especially funds established by local governments, has not received much attention.…”

Section: Introductionmentioning

confidence: 99%

Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process

Gupta

2020

Sustainability

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The performance evaluation of the government venture capital guiding fund (GVCGF) has come into focus in the field of venture capital. Most of the existing studies, such as whether the GVCGF has guided social capital to start-up enterprises and has played its due role in the process of enterprise growth and innovation, are all based on relevant work under the framework of econometric analysis. Unlike in these existing studies, we construct the performance analysis model of the GVCGF from four dimensions, including the standardization development of the guidance fund, the risk control ability, and the leverage and the support effects under the framework of a multi-attribute decision-making analysis. Taking a GVCGF project in Ningbo City, China, as an example, we comprehensively evaluate the development performance of the GVCGF using the intuitionistic fuzzy analytic hierarchy process (IFAHP). The results show that the development performance of the GVCGF is at a “relatively high” level. Compared with the traditional analytic hierarchy process (AHP), the IFAHP effectively avoids the false, enlarged influence caused by data subjectivity and evaluation uncertainty. This study provides a feasible analytical framework for the application of the IFAHP in other project performance evaluations.

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Section: Introductionmentioning

confidence: 99%

Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process

Gupta

2020

Sustainability

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“…Nevertheless, the state also plays a vital role in effecting social and economic development (Jia et al, 2019). In particular, the government has undertaken substantial efforts to promote entrepreneurship and innovation, especially by setting up, owning, and actively managing VC funds (Wang et al, 2013; White et al, 2005). One important form of GVC in China is government‐financed VC firms, usually established by provincial or city governments and operated as state‐owned enterprises (SOE) (White et al, 2005).…”

Section: Empirical Contextmentioning

confidence: 99%

“…It is a typical GVC in which significant funding (over 50%) comes from the Shenzhen government, and its board chair and CEO are appointed by the government (Zhang, 2018). Another important form of GVC in China is venture capital guided funds (VCGFs), in which the government mainly serves as the limited partner and does not actively manage the fund (Wang et al, 2013) but provides indirect support to stimulate the supply of VC funds from private investors (Avnimelech & Teubal, 2006; Leleux & Surlemont, 2003; Li, 2015). Since our study concerns the impact of GVC on startup innovation, we only focus on GVC funds that are directly managed by government bodies, following recent research (Alperovych et al, 2015; Bertoni & Tykvová, 2015; Cumming et al, 2017; Guerini & Quas, 2016; Murtinu, 2021), while our results are also consistent with the inclusion of VCGFs.…”

Section: Empirical Contextmentioning

confidence: 99%

“…We test our hypotheses in the context of a leading transition economy, China, where the government actively engaged in startup financing to foster technological innovation (White et al, 2005). Specifically, the Chinese government has implemented several policies to promote GVC investment in high‐tech industries (Wang et al, 2013). We gathered data on Chinese high‐technology startups founded during 2002–2017 and implemented a zero‐inflated negative binomial regression with a two‐stage residual inclusion (2SRI) method to address potential endogeneity of GVC endorsement.…”

Section: Introductionmentioning

confidence: 99%

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A legitimacy‐based view of the impact of government venture capital on startup innovation: Evidence from a transition economy

Devarakonda,

Liu

2023

Strategic Entrepreneurship

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Research SummaryThis study examines the role of government venture capital (GVC) on startup innovation in a transition economy context. Drawing on institutional theory, we advance a contextual view of GVC by proposing that GVC positively impacts the innovation of startups in transition economies by serving as a sociocognitive legitimating endorsement. Furthermore, our study offers a contingent framework by showing that GVC endorsement will be more meaningful for startups deficient in organizational sources of legitimacy, such as political ties and social prestige. Regression analyses using a longitudinal data of Chinese venture‐backed biopharma and medical device startups founded during 2002–2017 offer broad support for our theory about the sociocognitive legitimating role of GVC in transition economy contexts.Managerial SummaryWe explore the role of government venture capital (GVC) in promoting startup innovation within transition economies. In such contexts, where startups often face skepticism and legitimacy issues, our research reveals that GVC can play a crucial role by providing socio‐cognitive legitimacy. Our study suggests that this “state backing” enables transition economy startups to gain the trust of external knowledge resource holders, enhancing their innovation prospects. Our findings emphasize the significance of GVC as a means of active government intervention for fostering startup innovation, especially for startups deficient in other avenues of legitimacy. This insight is valuable for entrepreneurs and policymakers in transition economy contexts.

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“…Innovation and entrepreneurship in new businesses creation have always been established by literature as key elements for the economic growth of an economic system and for the creation of a competitive advantage (Ács, Audretsch, & Strom, 2009;Audretsch, 2007;Audretsch & Keilbach, 2004;Naudé, 2010). For this reason, scholars seek to analyze and understand these factors, while policy makers strive to stimulate them through the access to entrepreneurial finance (Cumming & Fischer, 2012;Nahata, 2008;Wang, Wang, Ni, & He, 2013;L. Wang & S. Wang, 2012;World Bank, 2004).…”

Section: Literature Reviewmentioning

confidence: 99%

The Role of Venture Capital in Supporting the Development Process of Innovative Start-Ups: Evidence From the Italian Market

Gervasoni¹,

Bollazzi²,

Bosio³

2018

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This research paper investigates the role of Italian venture capital in supporting innovative start-ups in their early-stage process, which is usually focused on the creation of a new product or the development of a new service.The aim of the study is to observe and assess the key economic features of innovative start-ups funded at the beginning of the early-stage by venture capital funds and thereafter analyze the level of development of target companies at four years since the capital injection. The sample of deals created to describe this dynamic process is composed by investments realized between 1996 and 2012 and, in this way, according to the chosen methodology, it is representative of Italian venture capital role and contribution in the years from 1996 to 2016. The authors used for their empirical study a proprietary database, Venture Capital Monitor-VeM TM . Through the analysis of collected data, the paper describes the strategic importance of venture capital investments in early-stage opportunities both for target companies and the Italian socio-economic environment, and finds aggregate values of reference to quantitatively define the socio-economic outcome of this kind of operations. A final further contribution is provided by comparing the present results to the ones of two previous studies conducted by the authors. 485research is to analyze if Italian venture capital funding and investment strategy model has been capable of producing positive effects on growth and innovation.The paper initially proposes a literature review, intended to define the main concepts of venture capital and set the theoretical framework, and then a brief analysis of Italian market trend in the last decade, which is useful to better frame the research question. Thereafter, the paper presents and analyzes a sample of 74 VC deals, over an initial database of 130 (that covers almost exactly the reference universe), which took place in Italy from 1996 to 2012. After assessing the sample representativeness of the overall market trend in those years, the authors analyze the balance sheet and the profit and loss of each target company at four years since the VC capital injection, in order to identify the contribution of venture capital in terms of value creation. This choice is mainly due to the average holding period of this kind of investments, which is usually between four and five years: According to this market evidence, the authors are so able to best evaluate the effects of venture capitalists' strategy and financing on participated firms.Finally, the paper presents the results of the analysis by reporting the most significant socio-economic indicators from an aggregate point of view and discussing the final remarks drawn from these, also comparing them to the findings of two previous studies conducted by the authors themselves.Consequently, the discussion of the analysis and the data reported assesses the real effects of VC on venture backed companies and its support to value creation, not only for target companies themselve...

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How Government Venture Capital Guiding Funds Work in Financing High‐Tech Start‐Ups in China: A ‘Strategic Exchange’ Perspective

Cited by 10 publications

References 31 publications

Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process

Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process

A legitimacy‐based view of the impact of government venture capital on startup innovation: Evidence from a transition economy

The Role of Venture Capital in Supporting the Development Process of Innovative Start-Ups: Evidence From the Italian Market

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