Abstract
Using the data of Chinese nonfinancial listed firms between 2005 and 2019, we adopt the propensity score matching‐difference‐in‐differences (PSM‐DID) model to empirically examine the relationship between VC and innovative entrepreneurship (IE). We find that IE is significantly improved after VC entry, and the promoting effect follows an inverted U‐shape over time. Mechanism tests reveal that the effect of VC on IE works mainly through three channels: alleviating financing constraints, enhancing R&D capability, and appointing directors. Furthermore, VC institutions with joint investment strategy and high shareholding ratio play a more significantly role in promoting IE; for industries with higher competition and area with good property rights protection, VC elevates IE more significantly. Finally, the results reveal a complementary relationship between VC and IE in their effect on firm value, especially for firms in eastern China, followed by those in central China.
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