Financing Innovation in the Yangtze River Economic Belt: Rationale and Impact on Firm Growth and Foreign Trade

The increasingly large role of financial intermediaries in promoting firms' innovation and internationalization has led to great research interest. China has faced mounting pressure to take entrepreneurial finance and innovation seriously. Little is known about entrepreneurial financiers' activities and performance. Focusing on entrepreneurial financiers' activities in the Yangtze River Economic Belt, this study investigates how they select projects and how well they perform in China. Evidence shows that various financiers serve in the financial system to nurture innovative entrepreneurial activities; they tend to focus on technology, and the major financiers vary with stage of industrial technological development. With the support of entrepreneurial finance, the invested firms in general maintain a sound growth momentum, but the foreign trade of relevant industries has not significantly increased and has even declined. The implication for industrial and international development policy is discussed.