Mixed Ownership and Firm Performance: Evidence from the Chinese Venture Capital Industry
66 Pages Posted: 17 May 2015 Last revised: 8 Dec 2020
Date Written: august 12, 2020
Abstract
We examine the impact of mixed ownership on the performance of venture capital (VC) firms in China. We use successful/unsuccessful exits from VC-financed entrepreneurial companies and number of patent applications by VC-financed companies as proxies for VC firms’ performance. Consistent with existing research on the inferior performance of SOEs relative to non-SOEs, we find that on average government-controlled VC firms (GVCs) underperform domestic private investors-controlled VC firms (PVCs). More importantly, we find that introducing minority private investors (i.e., mixed ownership) helps improve the performance of GVCs. However, we find no evidence that introducing minority government investors (i.e., mixed ownership) helps improve the performance of PVCs. Our results provide relevant information to the ongoing debate on the role of the government investors and private investors in developing the VC industry in emerging markets.
Keywords: venture capital; emerging market; China; government ownership; performance; innovation
JEL Classification: G24, G38, O31
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