Essays on Venture Capital and Innovation.

Summary This thesis discusses the business of encouraging entrepreneurial and innovative activities. The first chapter examines and evaluates the private sector's response to public participation in venture capital. The second chapter investigates and estimates the performance gap between government and private venture capital funds and the determinants of this gap. The third chapter provides a theoretical framework for understanding and analyzing the motivation for firm-level innovation in industrial networks. In Chapter 1, titled "Can Governments Foster Venture Capital Development?", I examine the role of government intervention in the emergence of venture capital (VC) in China from 1999 to 2013, using a unique policy experiment and innovative data base. The statistical analysis, using the double-difference method, shows that the central government's program leads to an increase in local investment by both public and private VC funds. In Chapter 2, titled "(Under)performance of public venture capital: evidence and explanations," I use a sample from the same source as in Chapter 1, and find that startups backed by government VC funds are less likely to go public than private VC funds. The results indicate that the performance gap is reduced as the venture capital market moves to a more advanced stage. In Chapter 3, "Corporate Association under Imperfect Information along the Global Value Chain," (co-authored with Rui Zhang), we show the existence of multiple equilibria in which a supplier may be associated with different seats, but at different stages of the value chain. Our model also includes countervailing forces of firm innovation incentives and we predict a non-monotonic trend between innovation and firm productivity.