The Impact Of Corporate Venture Capital On Entrepreneurial Firm's Technological Innovation Performance And Its Mechanism Study

In the past few years,corporate venture capital (CVC) obtained a rapid growth in China.lt has become a reliable source of venture capital supply.There is no doubt that CVC made itself an important participant in the venture-capital market.CVC parent firms typically make afinancial investment and receive a minority equity stake in an entrepreneurial firm.Besides the financial support,can CVC spur entrepreneurial firm's innovation performance ?CVC parent firms generally invest with a combination of financial and strategic objectives.And they are better than entrepreneurial firms in many ways,such as technology,personnel management and social relationship.So can entrepreneurial firms take advantage of CVC parent firms' better resource to improve its own innovation performance?In this paper,we analysis the impact of CVC on nurturing innovation for entrepreneurial firms.This article includes two aspects:first,we run the basic empirical tests to see if corporate venture capital differs from independent venture capital in nurturing innovation in entrepreneurial firms.Then we try to discover the possible underlying mechanisms if CVC do contribute to higher innovation performance of entrepreneurial firms.After looking into the literature in this field,we find that the key connection between CVC parent firms and entrepreneurial firms maybe the industry knowledge,and it can be used to improve innovation performance for both companies.To some extent CVC parent firms'management involvement can influence the efficiency of communication of CVC. We build up a theoretic framework with a sample of listed companies in Shenzhen Small & Medium Enterprise Board to test the effect of CVC on innovation performance in entrepreneurial firms;as measured by their patenting outcome and R&D investment.Then we present two possible underlying mechanism: technology fit between CVC parent firm and entrepreneurial firm,and CVC parent firm' management participant in entrepreneurial firm .We find that CVC-backed firms are more innovative,as measured by their patenting outcome.Empirical test shows that CVC doesn't contribute to higher R&D investment for entrepreneurial firms.We present consistent evidence with one possible underlying mechanism:CVC'S greater industry knowledge due to the technology fit between their parent firms and entrepreneurial firms,and the other possible underlying mechanism,as measured by CVC parent firms' management participant,seems to be a total failure.