The innovation and performance impacts of venture capital investment on China’s small- and medium-sized enterprises

This study examines the impacts of venture capital (VC) on performance and innovation of China’s small- and medium-sized enterprises (SME). Using unbalanced panel data of 2699 VC-backed and non-VC backed firms in China’s pilot over-the-counter equities market, namely the National Equity Exchange and Quotation (NEEQ) market, during 2005–2014, we find that venture capital financing not only spurs innovation in the Chinese market, but also exhibits significantly positive impact on financial performance. Empirical evidence reveals that syndication of venture capital investment as well as the reputation of venture capitalists helps to create value for VC-backed firms. However, no evidence is found that foreign VC-backed firms perform better than domestic VC-backed ones. The results are robust to a variety of specifications. Our findings imply that the VC financing is an effective channel to promote the development of SMEs at China’s multi-layer capital market and syndicated VC investments and venture capitalists with high reputation shall be encouraged to play a bigger role in nurturing innovation and entrepreneurship in the future.     

Endogenous product versus process innovation and a firm’s propensity to export

This article provides an empirical analysis of the effects of new product versus process innovations on export propensity at the firm level. Product innovation is a key factor for successful market entry in models of creative destruction and Schumpeterian growth. Process innovation helps securing a firm’s market position given the characteristics of its product supply. Both modes of innovation are expected to raise a firm’s propensity to export. According to new trade theory, we conjecture that product innovation is relatively more important in that regard. We investigate these hypotheses in a rich survey panel data set with information about new innovations of either type. With a set of indicators regarding innovation motives and impediments and continuous variables at the firm and industry level at hand, we may determine the probability of launching new innovations and their impact on export propensity at the firm level through a double treatment approach.     

Interdependence and spillovers: is firm performance affected by others’ innovation activities?

The creation of new knowledge is a case in which agents' behaviour can affect the performance of other actors positively, given that new knowledge creates positive externalities in the market. In this context, we investigate the existence of performance spillovers associated with innovation activities by quantifying the innovation produced in surrounding firms and controlling for the fact that a firm is itself an innovation producer. We use data from the Third Community Innovation Survey (CIS III) that measures innovation in a broad way, not reducing it to R&D and patents, which departs from previous literature on spillovers. Furthermore, to tackle the endogeneity of the innovation variables on the firm production decision, we resort to the firm intellectual property protection methods as an instrument. We found a positive spillover of innovation on firm value added. The results also show that process innovation spillovers are more prevalent than product innovation spillovers.     

Marshall’s disciples: knowledge and innovation driving regional economic development and growth

Studies of knowledge and innovation as driving forces of regional development and growth offer a myriad of approaches. Here, questions asked, methods used and answers given are manifold. In our overview, we cover recent developments in this research area. Moreover, we explore the question as to the extent to which approaches in this research area compete with or complement one another. It turns out that the various studies are much more complementary than competitive. However, there is still much ground to be covered before we fully understand the processes underlying the creation and dissemination of knowledge and innovation leading to regional development and growth.JEL Classification: R11, O32, O33, O18 Correspondence to: Claudia WerkerThis Special Issue is the outcome of the workshop on Knowledge and Innovation in Creating and Sustaining Regional Growth in a Global Environment held at Eindhoven University of Technology, The Netherlands, July 10 ^th until 12 ^th , 2003. Financial support by the Dutch research council (NWO), the Centre for Economic Research (CfER) of the Open University Milton Keynes (UK) as well as by Eindhoven Center for Innovation Studies (ECIS, The Netherlands) is gratefully acknowledged; as is the organizational support by ECIS. We are grateful for helpful comments by Ron Boschma and Joachim Schwerin. Moreover, we would like to thank Uwe Cantner for his kind support in making this Special Issue happen. Naturally, the usual disclaimer applies.     

Gender bias and women’s political performance

We model voters’ gender bias as a prejudice on women’s competence coming from a distorted prior. We analyse the effect of this bias in a two-period two-party election model in which voters care about both policy preference and competence. We find that, if voters (wrongly) believe that women are drawn from a distribution of competences with higher weights on lower values, female politicians are less likely to win office but, when elected, they are on average more competent than male elected officials. As a consequence, female incumbents seek re-election more often.     

Dynamic control of a monopolist’s product and process innovation with reference quality

ABSTRACT

Our main purpose is to investigate the dynamic control problem of a monopolist’s product and process innovation under reference quality. The main features of this article are: (i) a monopolist dealing with customer behaviour in the spirit of the principle of behaviour economics determines the product price, and carries out the activities of product and process innovation; (ii) the consumers’ demand depends on price, product quality and reference quality, and adopts an additive separable demand function form. Our main results show that under the cases of the monopolist optimum and the social planner optimum, (i) there exists an unique stable, which is a saddle-point steady-state equilibrium; (ii) the change rates of the monopolist’s investments in product and process innovation are increasing with the reference quality, while the monopolist’s steady-state investments in product and process innovation are decreasing with the reference quality; (iii) as the memory parameter increases with other parameters kept constant, it is very likely that the monopolist’s investment in process innovation be greater than the investment in product innovation; and (iv) the social incentive towards both investments in product and process innovation is always larger than the private incentive characterizing the profit-seeking monopolist.     

The effect of science and technology parks on a firm’s performance: a dynamic approach over time

We argue that the benefits provided by locations inside science and technology parks evolve over time. Firms inside parks can improve performance due to certain advantages related to knowledge spillovers and shared resources that can be particularly useful in earlier stages of the industry life cycle. In these industries, local knowledge sharing is particularly useful because no standards are clearly established, as we have confirmed in a sample of 12,800 firms from the PITEC database, located either on- or off-park. We also find that young firms can benefit more from the park than more established businesses in terms of both business growth and innovative capacity. Although older firms have greater experience and investments that would increase their capacity to absorb external knowledge, their associated rigidities prevent them from incorporating changes into their structures.     

Individual investor’s limited attention and IPO performance

The paper models and verifies the spread and decay of investor’s attention before listing on the stock market by using the Baidu Index as a proxy for investor attention of the frequency of searches. We find that individual investor’s attention has a significant influence on the first-day IPO return. We empirically study the allocation of investor attention among several stocks and discover that the more stocks going public on the same day, the milder and more similar their performance tends to be. This paper is the first to research IPO performance and individual attention.     

Scientific personnel reallocation and firm innovation: Evidence from China’s college expansion

Given that the supply of scientific personnel is inelastic, the expansion of public research may negatively influence private research by driving up the wage of scientific personnel and reallocating them away from private sectors. China's massive college expansion since 1999 and labor market segmentation provide us with a unique opportunity to investigate such a reallocation effect on firm innovation. Consistent with the reallocation hypothesis, we find that China's college expansion negatively influenced firm innovation as well as regional innovation in the short run. Moreover, we provide direct evidence on scientific personnel reallocation by finding that when college expansion was more intensive, highly educated laborers were less likely to choose an industrial job, and those working in industries enjoyed a higher wage rate when holding a professional (research related) job.     

Location determinant and MNE’s performance: A modeling test in the China’s automobile industry

This paper argues that the location strategy is an important successful condition for multinational enterprise’s investment in China. We conduct a location–performance model for multinationals in China, which is tested using a structural equation modeling approach on a sample of 216 joint ventures of automobile multinational enterprises in China. We find that the relationship between the location determinant and multinational performance is significant and positive, and which is supported by the local partner’s performance.     

Measuring universities’ R&D performance in China’s provinces: a multistage efficiency and effectiveness perspective

ABSTRACT

Evaluating universities’ R&D performance can serve as a tool for policymakers, enabling them to identify the best R&D practitioners for benchmarking and develop strategies for enhancing performance by highlighting areas of weakness. This study divides universities’ R&D performance into two dimensions: efficiency and effectiveness. We employ a network data envelopment analysis approach to measure universities’ R&D efficiency, and separately use a multi-index comprehensive evaluation method to assess their R&D effectiveness from a multistage perspective. We calculate the comprehensive R&D performance of universities in 30 provinces in China from 2004 to 2014. An analysis of temporal variation reveals that universities’ R&D performance in some provinces improved rapidly, increasing gaps in performance as a whole. The spatial pattern for the 30 provinces shows that universities in provinces with medium or strong R&D performance are mainly in coastal provinces and central areas in China. Finally, universities’ R&D activities are considered ‘efficient and effective’ only in a small number of provinces, while in most provinces, these activities can generally be considered ‘less efficient and effective.’ Hence, universities in provinces with different R&D performance modes should implement targeted improvement strategies according to their characteristics.     

Territory as a Psychosomatic Device: Gottmann’s Kinetic Political Geography

Without denying the importance of his contributions to regional, economic, historical and urban geography, a rediscovery of Jean Gottmann’s political geography and its current geopolitical relevance has been taking place in Europe since the 1990s. The relative absence of his name in most of the subfield historical accounts, in contrast to the international reputation of his book Megalopolis has inspired this article, which attempts a survey of Gottmann’s key contributions to political geography, with emphasis on those in French. A bio-bibliographical analysis, enhanced by original references to archival source, was necessary for reconstructing the genesis and development of his political geography. Specifically, Gottmann states that territory is a psychosomatic device because its political partitioning is produced by the psychological oscillation in pertinent communities between search for security and search for opportunities. In the conclusions, a few questions are raised about how his theories could be applied to improving our understanding of the contemporary geopolitical scenario.

The concept of territory, with its material and psychological components, is a psychosomatic expedient necessary to preserve freedom and the variety of separated communities in an interdependent and accessible space.

— Jean Gottmann, ‘The Evolution of the Concept of Territory’, Social Science Information 14/3–4 (1975) pp.29–47.

     

Firms’ human capital, R&D and innovation: a study on French firms

This article investigates the effects of human capital and technological capital on innovation. While the role of technological capital as measured by research and development (R&D) expenditure has been intensively investigated, few studies have been made on the effect of employee training on innovation. This article explores the relationship between innovation and firm employee training. Our methodological approach contributes to the literature in three ways. We propose various indicators of firm employee training. We build a count data panel with a long time-data series to deal with the issue of firms?? heterogeneity. We propose a dynamic analysis. Using dynamic count data models on French industrial firms over the period 1986?C1992, we find positive and significant effects of R&D intensity and training on patenting activity. Whatever the indicators of training our results show that the firm employee training has a positive impact on technological innovation.     

Product innovation and firms’ ownership

This paper explores (i) the incentives for an incumbent firm to acquire an entrant willing to sell a product innovation rather than openly competing with this entrant, and (ii) in case of acquisition, the incentives to sell simultaneously both the existing products and the new one rather than specializing on a single variant. We prove that, in some circumstances, an incumbent firm can find it profitable to make an acquisition proposal to the entrant. Nevertheless, in this acquisition scenario, a product proliferation strategy is never observed at equilibrium. Furthermore, while being available for sale, sometimes the innovation simply remains unexploited.     

Sovereignty as a Resource: Performing Securitised Borders in Tajikistan’s Pamirs

This paper scrutinises the translation of sovereignty into daily actions at the border. The Soviet Union established a heavily securitised and sealed border, which was perpetuated in post-Soviet, civil war-stricken Tajikistan by assigning the task to the Russian Federation’s border forces. After having taken over the task of guarding the border, the slowly recovering post-conflict state tried hard to maintain its own border control. Drawing on interviews with borderland people, this article discusses the convergence of Tajikistan’s strong claim but weak support for sovereignty, with the daily life of the borderland people. It will show how – given the Pamirs’ special status as a border district – far-reaching sovereign authority of state agents, aiming to provide security at the border, has been translated into arbitrary actions ensuring individual benefits and has been hidden by intransparency. The article argues that the lack of adequate support from the central government encourages state representatives at the border to reinterpret the sovereign power assigned to them in order to serve their own individual benefits and purposes. Instead of being used to maintain the state territory, the sovereignty’s power is diverted to serve individual interests, in the end serving to destabilize the border, the opposite of the intended purpose.     

Directors’ and officers’ liability insurance and firm innovation

In this paper, we investigate the impact of directors’ and officers’ insurance (D&O insurance) on firm innovation in China. We find that D&O insurance is significantly positively associated with firm innovation, which indicates that D&O insurance enhances managers’ tolerance for failure. To address endogeneity concerns, we adopt the propensity score matching method and difference-in-differences approach. We find that firms with D&O insurance have a stronger risk bearing capacity. Further analyses show that the impact of D&O insurance on firm innovation is more pronounced in firms with a better legal environment, male executives, and stronger external supervision.     

When are ‘sharks’ beneficial? Corporate venture capital investment and startup innovation performance

The effect of corporate venture capital (CVC) investment on startup innovation performance has been examined in the extant literature. However, when this effect is enhanced is the important but relatively understudied question in strategy and entrepreneurship research. We build on the idea of regarding CVC investment relationships as learning alliances and introduce two situational factors as boundary conditions on the performance effect of CVC investment. In order to handle the endogeneity of CVC investment, we employ propensity score matching and differences-in-differences techniques. Based on the sample of startups in the human biotechnology industry in the United States, we find that CVC funding is beneficial for startup innovativeness when CVC investment is established after initial independent venture capital funding. Moreover, a startup’s patent stock before CVC funding also influences on that effect.     

China’s value-added tax reform,firm behavior and performance

China reformed value-added tax (VAT) by removing investment from the tax base in northeastern provinces in 2004, which is a “natural experiment” of its tax system. Using difference-in-differences method, this paper for the first time investigates the impact of VAT reform on China firms’ fixed asset investment, employment behavior, innovative activities, and productivity, and furthermore discusses the impact of firm behavior on industrial structural upgrade and employment with a firm-level panel data of large and medium-sized manufacturing enterprises in China. We find that VAT reform significantly promotes firms’ fixed asset investment, and increases firms’ capital-labor ratio and productivity; while enhancement of firms’ productivity is mainly achieved by means of substituting labor with capital, rather than independent technology innovation; meanwhile, VAT reform distinctly decreases employment. Our findings have essential policy implications on the extension of VAT reform in the entire China.