Geographic distance, venture capital and technological performance: Evidence from Chinese enterprises

Venture capital (VC) plays an increasingly important role in advancing the technological innovation of enterprises. A growing body of evidence suggests that VC influences the technological performance of enterprises. No known empirical studies have focused on the relationships between geographic distance and the enterprise's technological performance. This study explores whether and how the geographic distance between VC institutions and enterprises influences the enterprise's technological performance from the perspective of the VCs equity backgrounds (governmental, private, and foreign) and investment strategies (independent and joint). The findings and conclusions are as follows: (1) The geographic distance between VC institutions and enterprises has a significantly nonlinear effect on the technological performance of the VC-backed enterprise, and they are negatively correlated when the geographic distance is less than the specified threshold. (2) The influence of geographic distance on the enterprise's technological performance varies with the VCs equity backgrounds. Geographic distance has a more significant impact on the technological performance of governmental VC- and private VC-backed enterprise compared with foreign VC-backed enterprise. (3) For different investment strategies, geographic distance also has a distinct influence on the enterprise's technological performance. When compared with joint VC, the impact of independent VC on the enterprise's technological performance is more influenced by geographic distance.