Can Governments Foster the Development of Venture Capital?

72 Pages Posted: 30 Jul 2018 Last revised: 2 May 2019

See all articles by Yue Fei

Yue Fei

Toulouse School of Economics (TSE)

Date Written: July 29, 2018


Exploring a novel dataset and a unique policy experiment, this paper examines the role of government intervention in the emergence of venture capital (VC) in China during 1999-2013. Using difference-in-difference methodology, I find that the central government program leads to an increase in local investment from both government and private VCs, which doubles the number of successful companies. The positive impact is most pronounced in relatively less developed regions and during the early development of the VC sector. I present two micro-level transmission channels of the crowding-in effects, through networks formed by previous investments and through co-ownership in VC affiliates.

Keywords: government venture capital programs, quasi-experiment, crowding-in, venture capital networks, IPO exits.

JEL Classification: G24; G28; H76; O38

Suggested Citation

Fei, Yue, Can Governments Foster the Development of Venture Capital? (July 29, 2018). Available at SSRN: or

Yue Fei (Contact Author)

Toulouse School of Economics (TSE) ( email )


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