Venture Capital as an Innovation Ecosystem Engineer in an Emerging Market

International Business Review, Forthcoming

48 Pages Posted: 5 Mar 2018

See all articles by Sunny Li Sun

Sunny Li Sun

University of Massachusetts Lowell

Victor Zitian Chen

University of North Carolina, Charlotte; University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration

Sanwar A. Sunny

University of Missouri at Kansas City

Jie Chen

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: February 24, 2018

Abstract

How can venture capital (VC) firms transform a weak innovation ecosystem into a productive and robust one? While the literature has found VC firms’ catalyst role in innovation in developed markets, we know little about whether and how they affect innovation in an emerging market, where formal institutions (e.g., regulations and markets) and informal institutions (e.g., professional networks) to enable VC firms’ catalyst role are relatively lacking. First, we argue that VC firms play a different and more proactive role in these markets as an “ecosystem engineer” through governing the resource flow and selecting deviation, which drive regional innovation performance. Second, such effects are further positively moderated by the presence of multinational enterprises (MNEs) in a region. Lastly, over time, while the direct effects of VC firms persist and increase, the moderating effects of MNE presence decline. Empirically, we examined a Chinese provincial-level panel data of VC activities (1999-2009) and patent applications (2000-2010) and found supportive evidence. Implications are discussed.

Keywords: Venture Capital; Innovation; Ecosystem; Co-Evolution; Emerging Market

JEL Classification: F23, L26, O3

Suggested Citation

Sun, Sunny Li and Chen, Victor Zitian and Sunny, Sanwar A. and Chen, Jie, Venture Capital as an Innovation Ecosystem Engineer in an Emerging Market (February 24, 2018). International Business Review, Forthcoming . Available at SSRN: https://ssrn.com/abstract=3129559

Sunny Li Sun

University of Massachusetts Lowell ( email )

72 University Ave.
Lowell, MA 01854
United States

HOME PAGE: http://https://scholar.google.com/citations?user=c-Covi4AAAAJ&hl

Victor Zitian Chen (Contact Author)

University of North Carolina, Charlotte ( email )

The Belk College of Business
Charlotte, NC 28223

HOME PAGE: http://www.ChenZitian.com/

University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration ( email )

The Belk College of Business
Charlotte, NC 28223

HOME PAGE: http://www.ChenZitian.com/

Sanwar A. Sunny

University of Missouri at Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

Jie Chen

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

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