The Role of Venture Capital on Chinese Innovation and Economic Growth

As an important financial resource specialized in providing capital for ideas, the importance of venture capital for translating innovative ideas into commercially successful products is widely acknowledged by academics and practitioners. However, existing research have not yet fully answered the issue on the real effect of venture capital (Gompers and Lerner, 2001([1])), especially for those emerging markets like China. In this paper, we empirically examine the impacts of venture capital on Chinese innovation and growths based on the regional data from 2004-2006, attempt to establish a causal relationship between venture capital investment and Chinese innovation and economic development. We have two basic finds: (1) venture capital in China begins to show a positive effect in the above two dimensions; (2) Chinese regional innovation activities and economic growth significantly lead to venture investments.