The Impact of Governmental Venture Capital on Firm Innovation: The Role of Proactive R&D Management

We investigate the effect of governmental venture capital (GVC) funds on firm-level technological innovation performance and how proactive R&D management influences the effectiveness of GVC funds. Using an unbalanced panel of 4999 firms listed on China's National Equities Exchange and Quotations from 2012 to 2019, this article employs the propensity score matching method with a difference-in-differences estimator to examine the effect of GVC funds. GVC funds can promote technological innovation at the firm level. This positive association between GVC funds and technological innovation is more pronounced in firms with proactive high-level R&D management compared to those with low-level R&D management. Policymakers could leverage GVC funds as a policy instrument to incentivize firms to innovate, focusing on directing funds to those with proactive R&D management. Firm managers should consider GVC funds as a valuable financial resource and facilitate the adoption of proactive R&D management to boost innovation performance. Building upon the resource dependence theory and dynamic capability theory, our study complements and extends existing research by revealing the positive effect of GVC funds on firm innovation and also identifying that proactive R&D management can enhance the effectiveness of GVC funds on firm innovation.