Venture capital investment in university spin-offs: Evidence from an emerging economy

Xiaoqing Maggie Fu, Richard T. Harrison and Dongfu Franco Li

Journal of Corporate Finance, 2022, vol. 74, issue C

Abstract: From a policy perspective, university spin-offs (USOs) with venture capital (VC) investment are most promising because they are growth-oriented and contribute most prominently to economic growth. Hence, effective policies should consider the motivation of VC investment in USOs. By employing a manually collected novel database that includes all listed high-tech USOs and related VC investment activities prior to initial public offering (IPO) in China over the past three decades, we observe a close relationship between a multi-layered second-tier stock market and a vibrant VC market for USO financing. We find that USOs receive less investment from government VCs and mixed-VC syndicates and receive their investment in an earlier stage than non-USOs but that private VCs have no funding bias against USOs. The result implies the presence of crowding-in effect of government VCs in the context of USO financing. Moreover, VC investment in USOs is more pronounced in deals that have a higher initial equity commitment of academic founders and a noncontrolling strategy, highlighting the importance of delivering “value”, “commitment”, and “trust” signals in winning VC funding. Finally, as private VCs in the form of limited partnerships behave like typical pre-IPO-stage investors, they barely demonstrate any significant preference over these factors.

Keywords: Venture capital; University spin-off; Initial public offering; Emerging economies (search for similar items in EconPapers)
JEL-codes: G24 G28 G30 G38 L26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119922000402
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:74:y:2022:i:c:s0929119922000402

DOI: 10.1016/j.jcorpfin.2022.102197

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().