Mixed Ownership and Firm Performance: Evidence from the Chinese Venture Capital Industry

We examine the performance of government-controlled VC firms (GVCs) relative to the performance of domestic private VC firms (PVCs) and foreign VC firms (FVCs) in the largest emerging market economy, China. We use successful/unsuccessful exits from and patent applications by VC-financed companies as performance evaluation metrics. GVCs are less likely than FVCs to experience both successful exits and unsuccessful exits. In addition, GVCs outperform FVCs in patent applications. However, both GVCs and FVCs underperform PVCs in successful exits and patent applications. There is evidence that stronger local institutional environments help improve the performance of both GVCs and PVCs relative to FVCs. Overall, our results suggest that there is no one-size-fits-all conclusion regarding the performance of Chinese GVCs, which is relevant to the ongoing debate on the role of the government and GVCs in developing the venture capital industry in emerging markets.