Empirical Research Of The Influence Of China’s Venture Capital On Enterprises’ Patenting Activities

Venture capital (VC) is a kind of financial capital given to start-up, high potential, high risk, highly growth enterprises. Venture capital funds gain revenue by owing shares in enterprises, which usually have novel technology or business styles in high-tech industry, such as bio-tech, IT or software.The development of venture capital industry in Europe and the United States, and its promoting effect on high-tech industry is obvious to all. However, because of its short-time development in China, and its development depth is shallow, its influence on high-tech enterprises in our country remains to be uncertain. Among former research and study, most scholars have affirmed the promoting effect of VC on technological innovation, but there is still no lack of negative or neutral arguments. In this article, we want to study the relationship between China’s VC and enterprises’ patent activities, in order to determine whether China’s VC can promote the high-tech enterprise’s patent innovation, thus promote the development of hi-tech industry.In theory eyesight, we can identify the relationship between VC and innovation in three aspects. Firstly, VC funds can provide a new kind of governance mechanism, by which high-tech enterprises can broke the restricts to keep sustainable innovation. Secondly, high-tech enterprises typically gain a characteristic of risk, so that other financial institutions are reluctant to finance them. On the contrary, VC institutions can eliminate the information asymmetry by due diligence, and then formulate appropriate financial contracts. At last, VC institutions and high-tech enterprises is complementary in capital. What’s more, once the product is fully developed the focus shifts from development to sales so the number of generated inventions should decrease. This behavior implies that VCs are likely to spur invention according to an inverted U-shape over time.We empirically examine whether patent trajectories are consistent with this hypothesized inverted U-shape using a self-collected dataset containing359 high-tech firms in China from1999to2013. We find that firms’patenting activity increases after VC investments. This increase is substantially more pronounced the first two years following VC investments.The article is organized as follows. In Section1we introduce the whole research. In Section2we simply talk about the definition, features of VC, and the development of VC worldwide. In Section3we summarize history papers as a review. Section4analyzes the relationship between VC and innovation in theory sight. Section5and6presents the data, describes the econometric strategy, the empirical specifications used to test the hypotheses of interest and the results, which are discussed in the following Section. We also give some advises in Section7.