Impact of Venture Capital on Firm's Technological Innovation: Empirical Study Based on the Strategy of Pre- and Post-Investment

We investigate the impact of venture capital (VC) on the technological innovation of the firms listed on China's National Equities Exchange and Quotations (NEEQ) and identify the role of the VC strategy in this process, by using the data related to VC investment, firm innovation, and human capital. The empirical results demonstrate that (i) VC effectively promote the technological innovation of target firms, especially in the high-tech industry; (ii) as two parts of the VC strategy in the preinvestment phases, the entry time affects the technological innovation, and VC investing in the mature stage of target firms generally implements the short-termism strategy, appearing to inhibit the technological innovation, while the shareholding ratio affects the innovation in a nonlinear form, with a pivotal point at an ratio of 21%; and (iii) in the postinvestment phases, the intervention of VC on optimizing the target firms' human capital structure forms its strategy, promoting a significant increase in the proportion of R&D personnel or skilled labor, and promotes the technological innovation. On the whole, our findings provide an insight of how VC influences technological innovation, underscoring the relationship among investment strategy, firm characteristics, and innovation trajectory.