Examining the Impact of Government Investment in Venture Capital on Entrepreneurship Financing: Does It Make a Difference?

This study examined how government investment affects venture capital (VC) development and entrepreneurial activities. Using data from 1992 to 2012 in China, I investigated the causal impact of the government investment in VC with a natural experimentation research design. More specifically, I studied the how the onsite of a policy that allows government to invest in VC industry induces change on VC fundraising and VC investment. The results indicated that the initiation of a government investment policy could insert an immediate positive impact on VC fundraising, while it also induced a gradual significant change on the entrepreneurship financing of local start-ups.