Patent growth and the long-run performance of VC-backed IPOs

Yeqing Zhang and Xueyong Zhang

International Review of Economics & Finance, 2020, vol. 69, issue C, 33-47

Abstract: This study analyzes the impact of venture capital (VC)-backed IPO firms’ patent growth during the period of VC investment on the long-run performance of stock returns, using data on the China A-share market between 2003 and 2013. The baseline results indicate that VC-backed firms that have generated successful patent filings during the investment period of VCs exhibit superior post-IPO performance compared to other VC-backed firms and non-VC-backed firms in the long run. These results continue to hold under several robustness checks. Overall, we provide a clear, crucial mechanism showing that venture capital improves the long-run performance of IPOs by increasing the number of granted patents of portfolio firms; that is, technological innovation is the major contributing factor to the long-run performance of VC-backed IPOs.

Keywords: Innovation; Patent growth; Long-run performance; Venture capital (search for similar items in EconPapers)
JEL-codes: G24 G32 O31 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:69:y:2020:i:c:p:33-47

DOI: 10.1016/j.iref.2020.04.006

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