Research On The Mechanism Of The Influence To China’s Venture Capital On Enterprise Technological Innovation

From the practice point of view, the contribution of science and technology has alreadybeen recognized for the tremendous economic growth. However, science and technology doesnot automatically lead to economic growth, that is to say, it’s not a simple linear relationshipbetween science technology and economic growth. Innovation is just one of the crucial oneannulus. As Joseph Aloes Schumpeter clearly pointed out in “Theory of EconomicDevelopment", it’s not capital and labor, but innovation is the fundamental reason for thedevelopment of capitalism.“It’s the use of different methods (Innovation) has changed theworld’s economy in the past50years rather than greater savings or moreavailable labor."Throughout the development of the U.S. economy since1990s, whatimpresses us most is that U.S. economic growth is essentially driven on high-tech industries,which in turn benefits from the technological innovation activities. The risk investment hasalso played a crucial role in promoting the development of these enterprises.Research on the mechanism of the influence to China’s venture capital on enterprisetechnological innovation from the microscopic point of view has now become a focus and hotissue in recent years. Butdue to the short study period, there’re differences among diffidentschools, and also many theoretical and empirical conflicts existing. In China, data on sample ofventure capital is difficult to obtain due to the late start. Therefore, research on this issue is notyet in depth. However, study deeply on this issuenot only conducive to the formation of benigninteraction mechanism of venture capital and to technological innovation and technologicaldevelopment of ecological environment, but also has important practical significance to theestablishment of an innovative country. In addition, it also plays a practical role and hasacademic value for the risk of the promotion of investment development, establishment of amulti-level, and comprehensive financial market.This paper mainly adopts the combination of standardized analysis and empiricalanalysis, combines with literature review and data analysis. Firstly, we make analysis on the research status of impact of venture capital on technological innovation and makeinvestment proposed study of practical and theoretical significance of the impact oftechnology on the risk of investing in innovation. We systematically combinetheory andliterature of venture capital and technology innovation. On the basis of theoretical studyand econometric models, wefind that venture investments were demonstrated to have a rolein promoting technological innovation, using propensity score matching methodcombinedwith a series methods such asmethod based on the analysis, time series analysis anddynamic analysis. Based on the result, we further study the different characteristics ofventure capital, investment strategies and to what extent influences does different degreesof technological innovation has to the level of participation. This paper uses the methodof theoretical analysis and statistical analysis to discuss this issue, and finds thatheterogeneous characteristics of venture capital, and the participation of differentinvestment strategies, would lead to differences in the extent of the impact of technologicalinnovation.Through theoretical and empirical analysis of the promotion to the role of venturecapital for technological innovation, and the in-depth study of the institutionalcharacteristics of venture capital, investment strategy and participation in environmentalimpact of technological innovation. The main results of this study are as shown below:(1) After the introduction of propensity score matching method, the problem of"self-selection" is eliminated. Firstly, according to the whole sample, the number of patentsinvolved in the business of venture capital investment is more than those without ones.According to industry comparisons, venture capital companies run betterin manufacturing andinformation technology industry. Secondly, from the time-series analysis, the risk ofinvestment in technological innovation is not significant in the initial investment. With thedevelopment of China’s venture capital industry, there are more patents involved in the venturecapital companies a significant excess risk-free investment involved in the enterprise in theyear2007,2010to2012. Finally, we analyze the changes in venture capital firms around thepatent number using event study. There’re significantly fewer risk patents contest beforecorporate venture capital investment involved in those risky investment companies. There arerisks involved in investing in companies whose patents than the risk-free investmentcompanies to participate significantly more in the year and after four years. In particular, aftera year of investment, the mean difference reaches the maximum. (2) Funding from venture capital background, state-owned background and thebackground of Sino-foreign joint venture capital firms invested enterprises in their innovationshows no significant effect. However, foreign background ventures shows significant impacton its business of innovation. See from the scale of capital investment risk managementperspective, the scale and innovation funds into an inverted U-shaped relationship. This resultsuggests that there is an optimal size of funds management for the promotion of innovation.And the optimal size of funds under management of innovation and investment has asignificant role in promoting after a year. From an investment perspective of venture capitalactivity, business activity and the total number of venture capital firms in the patent have asignificant positive correlation. However, more active in the venture capital investment doesnot promote the growth of corporate patent numbers, or even negative correlation (althoughnot significant). It can be inferred from the statistical results that the more active venture capitalhas a stronger ability to choose a more strong innovation potential business. However, theseventure capital investments do not show role in promoting business innovation capability.Finally, from the successful experience of venture capital perspective, there are more cases ofsuccessful exits by IPO companies, and their business investments have more patents.Although companies that have more experience of successful exits of venture capitalinvestment activity and the improvement of innovative companies have a positive correlationbut the statistics are not significant. Therefore, the more experienced IPO exits companies inferthat they are also more experienced ones in the selection of companies. And because of theirhigh reputation, it calls for more competitive innovation ability of enterprises to select as aninvestment target.(3) The reason for venturecapital using different investment strategy is that pre-investedenterprises companies compared weaker. Venture capital is considered to be used to avoid therisk of a phased investment or joint investment. After the investment, the investment strategydistinguishing stages would restrict the technological innovation of enterprises, while there wasno significant impact on the investment strategy of the joint enterprise technology innovation.(4) This paper study the risk of the relationship between company involvement andtechnological innovation using four parameters of the vote reflecting the investment riskinvolved in ownership concentration degree, board size, control and separation ofownership and management. Firstly, we concluded that the board scale and technologicalinnovation have an inverted U-shaped relationship. Also, the participation of venture capital enables the optimal size ofboard change from7-8into8-9people. Second, theimpact of the concentration on the degree of control over the business and technologicalinnovation of the test results to infer the concentration of corporate control and the numberof patents inverted U-shaped relationship, while the most conducive proportion of controlto innovation is about50-51%. Under this proportion of control, entrepreneurs haveabsolute powers. But the control of the risks of their investments would have certainconstraints and impact to them. Again, the empirical result also shows that enterprises haveseparation of ownership and management havesignificantly more innovations. Described inthe venture capital participation, equity incentives is used as to effectively weaken theagency problem between the CEO and shareholders, also giving full play to the positiverole of professional managers of technology innovation. Finally, the study also found nosignificant relationship between corporate ownership concentration and technologicalinnovation. These results illustrate the differences between ownership concentration andcontrol over the degree of concentration of ownership concentration that relationship is toallocate residual claims, and the impact of control the business decisions. Thus, enterprisesthat have patent application have decision-making level of strategic issues.Finally, this paper put forward further research area according to the research resultsand limitation.