Governmental Venture Capital and Startup AI Innovation: Evidence from China

Governmental Venture Capital and Startup AI Innovation: Evidence from China | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Governmental Venture Capital and Startup AI Innovation: Evidence from China Yong Yang, Shuyu Li, Bin Hao, Yawen Zhang This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8749029/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study examines whether governmental venture capital (GVC), relative to private venture capital (PVC), more effectively steers startup innovation toward strategic, high-uncertainty technologies, using the rise of artificial intelligence (AI) in China as our empirical setting. Our analysis is based on a comprehensive sample of Chinese startups (operating outside the core AI industry) that received venture capital between 2010 and 2019. We leverage the staggered rollout of GVC investments across Chinese startups as a quasi-natural experiment and employ a difference-in-differences (DID) design combined with propensity score matching (PSM). Our baseline results show that GVC-backed startups generate significantly more AI patents than PVC-backed counterparts. We also find that the innovation-promoting effect of GVC is amplified in regions with greater state-owned sector dominance but attenuated in regions with higher corruption. Our findings are robust to a series of tests, including parallel trends validation, placebo analyses, an instrumental variable (IV) strategy using regional GVC fund density and alternative specifications. Further heterogeneity analyses indicate that this effect is stronger for startups backed by VCs with less specialization or lower IPO experience, and that it becomes significantly more pronounced in the latter half of the 2010s as China's AI policy ecosystem matured. Overall, this study demonstrates how GVC shapes corporate innovation strategy in emerging technological waves, with direct implications for the design of public venture programs and innovation policy in technology-driven economies. Governmental venture capital Startup innovation Artificial intelligence Technology hype Institutional environment Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8749029","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":596761868,"identity":"b3bc07d7-8100-4de1-8268-ebbe13b3bf51","order_by":0,"name":"Yong Yang","email":"","orcid":"","institution":"Shanghai Polytechnic University","correspondingAuthor":false,"prefix":"","firstName":"Yong","middleName":"","lastName":"Yang","suffix":""},{"id":596761869,"identity":"575d351b-3eaa-49eb-9ef0-634953f8b74d","order_by":1,"name":"Shuyu Li","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA4UlEQVRIie3RMQrCMBSA4VcqugS7tlTMFSKFgiB4lVcEJwdBEDcDgpMHiNBD6A3i1KU4Z6yTi0PBXaypc9pRMP/Q16EfL6EANtsPRoUekngACIV+byBMfUnAIeHYivg1ASbBaUnCQxwSkINI4b1I9jDsK3SeSwOhaa4JiXOZ8IpEgUI3FKY1avElGdckOSnsuqQNiXagybY9Yb16C7ImwtR8NU6ZJH51F4FXf3TMb7vQRKiYndVj85p6YoFluZ7Qfja7PI0HA+j4wD6TYPX4/CaHmwGAW9azJ5u+tNlstj/tDQRpTWATEH2oAAAAAElFTkSuQmCC","orcid":"","institution":"Xi’an Jiaotong-Liverpool University","correspondingAuthor":true,"prefix":"","firstName":"Shuyu","middleName":"","lastName":"Li","suffix":""},{"id":596761870,"identity":"06ea7dcd-5e3a-46df-bd89-624c986d3f97","order_by":2,"name":"Bin Hao","email":"","orcid":"","institution":"Xi’an Jiaotong-Liverpool University","correspondingAuthor":false,"prefix":"","firstName":"Bin","middleName":"","lastName":"Hao","suffix":""},{"id":596761871,"identity":"f0fce4d2-fbd4-43e8-b3b9-1fae7067cb3d","order_by":3,"name":"Yawen Zhang","email":"","orcid":"","institution":"East China University of Science and Technology","correspondingAuthor":false,"prefix":"","firstName":"Yawen","middleName":"","lastName":"Zhang","suffix":""}],"badges":[],"createdAt":"2026-01-31 10:38:56","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8749029/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8749029/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":103740458,"identity":"f23bfd88-b4ff-4a64-aea5-8c550fcb3ed7","added_by":"auto","created_at":"2026-03-02 10:54:36","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":582557,"visible":true,"origin":"","legend":"","description":"","filename":"RQFAGovernmentalVentureCapitalandStartupAIInnovation0205.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8749029/v1_covered_62ddae26-6449-4e1a-a167-6caff6bd9c05.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"\u003cp\u003eGovernmental Venture Capital and Startup AI Innovation: Evidence from China\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Governmental venture capital, Startup innovation, Artificial intelligence, Technology hype, Institutional environment","lastPublishedDoi":"10.21203/rs.3.rs-8749029/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8749029/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis study examines whether governmental venture capital (GVC), relative to private venture capital (PVC), more effectively steers startup innovation toward strategic, high-uncertainty technologies, using the rise of artificial intelligence (AI) in China as our empirical setting. 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