Venture Capitalists on Boards and Corporate Innovation

Li Jing () and Huiying Zhang ()
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Li Jing: College of Management and Economics, Tianjin University, Tianjin 300072, China
Huiying Zhang: College of Management and Economics, Tianjin University, Tianjin 300072, China

JRFM, 2023, vol. 16, issue 3, 1-15

Abstract: Venture capital has a significant positive impact on corporate innovation. However, innovation has great risks. Investors often lack sufficient confidence in innovation, which often leads to investors stopping their investment or to inadequate support for innovation behavior. Therefore, enhancing investor confidence is crucial. Monitoring is considered to be the most direct and common way to promote investor confidence. This paper mainly focus on the effect of venture capitalist monitoring on corporate innovation. We use companies listed in the Shenzhen and Shanghai stock exchanges from 2009 to 2017 as samples. We performed a metrological test and a series of robustness tests and found that venture capitalists on boards play a significant role in promoting corporate innovation. When dividing the sample according to the experience of venture capital or the governance level of the corporation, we found that venture capitalists on boards with high experience or in corporations with high-quality governance have a greater impact on corporate innovation. Furthermore, we studied the monitoring mechanism of venture capital on boards and found that the monitoring of venture capital can alleviate managers’ anxiety about being dismissed due to innovation failure.

Keywords: venture capitalists on boards; innovation; career concern (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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