Abstract

Venture capital (VC) has been the primary financing mode for startup companies in high-tech sectors and helps accelerate IPO process. Existing literature suggests a link between an earlier or later IPO decision and VC investors. Therefore, in this article we select a sample of 341 VC-backed companies that went public in Shanghai and Shenzhen Stock Exchanges from 2004 to 2010, and investigate the effect of industry technological improvement on the length of VC incubation period, IPO market timing and companies’ post-IPO performance. The empirical results indicate: technological improvement shortens VC incubation period and brings about the IPO market timing decision. Furthermore, companies with longer incubation period and high experience VC support, will be granted more patents and have better performance after their IPOs. The findings reveal the potential tight relationship between financial and product markets, and bring to light that the venture capitalists (VCs) play the role of the value creation.

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