Venture capital shareholding, tolerance for technological innovation failure, and technological innovation performance: evidence from China

This paper studies the impact of venture capital’s tolerance for technological innovation failure on invested companies’ technological innovation performance using Chinese data. The results show that the higher venture capital’s tolerance for technological innovation failure, the better the performance of the company’s technological innovation. The heterogeneity of venture capital is further examined. We find venture capitals that invest jointly, with foreign-funded or governmental backgrounds can positively regulate the effect of tolerance on performance. However, in industries where innovation is of high difficulty, participation of government venture capital inhibits this effect. Our conclusions provide enlightenment for improving companies’ technological innovation performance.