An Empirical Study On Venture Capital And Regional Economy Of China

Venture Capital (VC), with a history of more than half a century, has developed 20 years in China. Both practical and empirical data have shown VC had been exerting great impact on the regional economy. While, so far, oversea studies mainly focus on enterprise performance level, and in China it is stagnant in theoretical research. So this paper wants to break through in this respect.The first part begins with two main lines: factor effect and technical effect to explore theoretical mechanism between VC and regional economic growth. This part builds a theoretical model, adding VC sector to C-D production function, with econometric tools to analyze what influence VC has on regional economic growth in China's eastern, central, and western areas, and further what these influences differentiate. The empirical result concludes that in the eastern area, effects of capital factor and labor factor of VC are notable, however, in the central and western regions, only VC's capital factor results in notable way. Difference of capital factor effect in 3 areas is not obvious to a notable level; however labor factor effects of VC have shown significantly difference in those areas. Technical effects are not reflected in all the areas, whereas, the effect of technology channel, which did not appear in the central and western regions, exists in the East.Then, the paper constructed a VC regional environment evaluation system by AHP including 7 first level indicators and 17 second level indicators. Comparing the main dimensions of China's three major regions in VC environment, we find great difference, which cause uneven VC distribution in those areas and thus, different role in the ultimate effects of VC. But the central and western regional VC investment environment is improving, so as to narrow the gap with the eastern region.Finally, this paper combining the characteristics of VC industry and three regions' VC environment, explores how various regions according to local conditions create a better regional VC environment, to promote VC for regional economic growth.