ABSTRACT
Using panel data from 282 Chinese cities from 2003 to 2015, we estimate the impact of venture capital (VC) on innovation, employment, and payroll in metropolitan areas. Controlling for endogeneity, VC investments are significantly positively related to metropolitan innovation, employment, and payroll in a fixed effects panel regression and dynamic GMM estimation. Using the number of IPOs (Initial public offerings) in the city as an instrumental variable to again control for endogeneity, VC remains significant. Our results show that VC is significantly contributing to the metropolitan economy as a whole by supporting innovation, creating jobs, and generating wealth in the local cities.
Acknowledgements
This work was supported by the National Science Foundation for Young Scientists of China under Grant [71703036], the UK–China Collaborative Projects of Economic and Social Research Council (ESRC) of UK and National Natural Science Foundation of China (NSFC) under Grant [71661137006], and the Innovative Group of National Natural Science Foundation of China under Grant [71521061].
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Christina Larson, China’s Latest Growth Market: Venture Capital, 23 November 2015, https://www.technologyreview.com/s/543401/chinas-latest-growth-market-venture-capital/.
2 Data Source: China Science and Technology Development Strategy Research Institute, China Venture Capital development annual report: 2016.
3 In China, there are three types of patent classification: (1) invention patent, (2) utility patent, and (3) design patent. In our study, we use (1) as comparable to U.S.’s patenting practice.
4 Note: The regression between and , , is indeed not significant.