IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v129y2024ics0140988323006941.html
   My bibliography  Save this article

Government venture capital and innovation performance in alternative energy production: The moderating role of environmental regulation and capital market activity

Author

Listed:
  • Du, Qunyang
  • Li, Zhongyuan
  • Du, Min
  • Yang, Tianle

Abstract

Energy shortages and environmental concerns have prompted governments to focus on alternative energy production innovation. Although studies examine the association between government venture capital and green innovation, there remains a gap in understanding how the different characteristics of government venture capital affect innovation. This study examines the effects of government venture capital on the innovation performance of alternative energy production. Using negative binominal regression and system generalised method of moments models with data from 30 provinces in China for the period spanning from 2003 to 2019, we find that government venture capital exerts an inverted U-shaped effect on the innovation performance of alternative energy production. In addition, environmental regulation strengthens this inverted U-shaped effect, while capital market activity alleviates it. Moreover, we confirm that government venture capital affects alternative energy production innovation through the R&D investment channel. Our study enriches the resource-based view, agency theory and the institution-based view by shedding light on how the different characteristics of government venture capital affect alternative energy production innovation. The findings suggest that policymakers should strike a balance between government intervention and market mechanisms.

Suggested Citation

  • Du, Qunyang & Li, Zhongyuan & Du, Min & Yang, Tianle, 2024. "Government venture capital and innovation performance in alternative energy production: The moderating role of environmental regulation and capital market activity," Energy Economics, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323006941
    DOI: 10.1016/j.eneco.2023.107196
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988323006941
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2023.107196?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dong, Weijia & Li, Ye & Lv, Xin & Yu, Chang, 2021. "How does venture capital spur the innovation of environmentally friendly firms? Evidence from China," Energy Economics, Elsevier, vol. 103(C).
    2. Bertoni, Fabio & Tykvová, Tereza, 2015. "Does governmental venture capital spur invention and innovation? Evidence from young European biotech companies," Research Policy, Elsevier, vol. 44(4), pages 925-935.
    3. Tom Broekel, 2015. "Do Cooperative Research and Development (R&D) Subsidies Stimulate Regional Innovation Efficiency? Evidence from Germany," Regional Studies, Taylor & Francis Journals, vol. 49(7), pages 1087-1110, July.
    4. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    5. Cumming, Douglas J. & MacIntosh, Jeffrey G., 2006. "Crowding out private equity: Canadian evidence," Journal of Business Venturing, Elsevier, vol. 21(5), pages 569-609, September.
    6. Yuko Arayama & Katsuya Miyoshi, 2004. "Regional Diversity and Sources of Economic Growth in China," The World Economy, Wiley Blackwell, vol. 27(10), pages 1583-1607, November.
    7. Tereza Tykvová, 2006. "How do investment patterns of independent and captive private equity funds differ? Evidence from Germany," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 20(4), pages 399-418, December.
    8. Colombo, Massimo G. & D’Adda, Diego & Quas, Anita, 2019. "The geography of venture capital and entrepreneurial ventures’ demand for external equity," Research Policy, Elsevier, vol. 48(5), pages 1150-1170.
    9. Gao, Yuchen & Hu, Yimei & Liu, Xielin & Zhang, Huanren, 2021. "Can public R&D subsidy facilitate firms’ exploratory innovation? The heterogeneous effects between central and local subsidy programs," Research Policy, Elsevier, vol. 50(4).
    10. Yang, Tianle & Li, Fangmin & Du, Min & Huang, Miao & Li, Yinuo, 2023. "Impacts of alternative energy production innovation on reducing CO2 emissions: Evidence from China," Energy, Elsevier, vol. 268(C).
    11. Al Mamun, Md & Boubaker, Sabri & Nguyen, Duc Khuong, 2022. "Green finance and decarbonization: Evidence from around the world," Finance Research Letters, Elsevier, vol. 46(PB).
    12. Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 663-691.
    13. Yannis Pierrakis & George Saridakis, 2019. "The role of venture capitalists in the regional innovation ecosystem: a comparison of networking patterns between private and publicly backed venture capital funds," The Journal of Technology Transfer, Springer, vol. 44(3), pages 850-873, June.
    14. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
    15. Gray, Wayne B. & Shadbegian, Ronald J., 2003. "Plant vintage, technology, and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 384-402, November.
    16. Terttu Luukkonen & Matthias Deschryvere & Fabio Bertoni, 2013. "The value added by government venture capital funds compared with independent venture capital funds," Post-Print hal-02312981, HAL.
    17. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    18. Ben Youssef, Adel & Boubaker, Sabri & Omri, Anis, 2018. "Entrepreneurship and sustainability: The need for innovative and institutional solutions," Technological Forecasting and Social Change, Elsevier, vol. 129(C), pages 232-241.
    19. Costantini, Valeria & Crespi, Francesco, 2008. "Environmental regulation and the export dynamics of energy technologies," Ecological Economics, Elsevier, vol. 66(2-3), pages 447-460, June.
    20. Colombo, Massimo G. & D’Adda, Diego & Pirelli, Lorenzo H., 2016. "The participation of new technology-based firms in EU-funded R&D partnerships: The role of venture capital," Research Policy, Elsevier, vol. 45(2), pages 361-375.
    21. Berkman, Henk & Cole, Rebel A. & Fu, Lawrence J., 2010. "Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(6), pages 1391-1417, December.
    22. Douglas Cumming & Sofia Johan, 2009. "Pre-seed government venture capital funds," Journal of International Entrepreneurship, Springer, vol. 7(1), pages 26-56, March.
    23. Jaaskelainen, Mikko & Maula, Markku & Murray, Gordon, 2007. "Profit distribution and compensation structures in publicly and privately funded hybrid venture capital funds," Research Policy, Elsevier, vol. 36(7), pages 913-929, September.
    24. Costa-Campi, M.T. & Duch-Brown, N. & García-Quevedo, J., 2014. "R&D drivers and obstacles to innovation in the energy industry," Energy Economics, Elsevier, vol. 46(C), pages 20-30.
    25. Samila, Sampsa & Sorenson, Olav, 2010. "Venture capital as a catalyst to commercialization," Research Policy, Elsevier, vol. 39(10), pages 1348-1360, December.
    26. Baumann, Julian & Kritikos, Alexander S., 2016. "The link between R&D, innovation and productivity: Are micro firms different?," Research Policy, Elsevier, vol. 45(6), pages 1263-1274.
    27. Zeng, Shihong & Jiang, Chunxia & Ma, Chen & Su, Bin, 2018. "Investment efficiency of the new energy industry in China," Energy Economics, Elsevier, vol. 70(C), pages 536-544.
    28. García-Quevedo, José & Segarra-Blasco, Agustí & Teruel, Mercedes, 2018. "Financial constraints and the failure of innovation projects," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 127-140.
    29. Criscuolo, Chiara & Menon, Carlo, 2015. "Environmental policies and risk finance in the green sector: Cross-country evidence," Energy Policy, Elsevier, vol. 83(C), pages 38-56.
    30. Gaddy, Benjamin E. & Sivaram, Varun & Jones, Timothy B. & Wayman, Libby, 2017. "Venture Capital and Cleantech: The wrong model for energy innovation," Energy Policy, Elsevier, vol. 102(C), pages 385-395.
    31. Yuncai Liu & Nengsheng Luo & Shusheng Wu, 2019. "Nonlinear Effects of Environmental Regulation on Environmental Pollution," Discrete Dynamics in Nature and Society, Hindawi, vol. 2019, pages 1-10, March.
    32. Munari, Federico & Toschi, Laura, 2015. "Assessing the impact of public venture capital programmes in the United Kingdom: Do regional characteristics matter?," Journal of Business Venturing, Elsevier, vol. 30(2), pages 205-226.
    33. Omer Brav, 2009. "Access to Capital, Capital Structure, and the Funding of the Firm," Journal of Finance, American Finance Association, vol. 64(1), pages 263-308, February.
    34. Montmartin, Benjamin & Herrera, Marcos, 2015. "Internal and external effects of R&D subsidies and fiscal incentives: Empirical evidence using spatial dynamic panel models," Research Policy, Elsevier, vol. 44(5), pages 1065-1079.
    35. Wu, Ting & Yang, Shuwang & Tan, Jingjing, 2020. "Impacts of government R&D subsidies on venture capital and renewable energy investment -- an empirical study in China," Resources Policy, Elsevier, vol. 68(C).
    36. Fernanda Arreola & Rodrigo Bandeira-de-Mello, 2018. "The Differential Effects of Minority State Ownership Types on the Internationalization of Emerging Market Multinationals from Democratic States," Management International Review, Springer, vol. 58(5), pages 845-869, October.
    37. Kwangsoo Shin & Sang Ji Kim & Gunno Park, 2016. "How does the partner type in R&D alliances impact technological innovation performance? A study on the Korean biotechnology industry," Asia Pacific Journal of Management, Springer, vol. 33(1), pages 141-164, March.
    38. Hsu, Po-Hsuan & Tian, Xuan & Xu, Yan, 2014. "Financial development and innovation: Cross-country evidence," Journal of Financial Economics, Elsevier, vol. 112(1), pages 116-135.
    39. Cristiano Antonelli & Pier Paolo Patrucco & Francesco Quatraro, 2011. "Productivity Growth and Pecuniary Knowledge Externalities: An Empirical Analysis of Agglomeration Economies in European Regions," Economic Geography, Clark University, vol. 87(1), pages 23-50, January.
    40. Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages 54-72, February.
    41. Singh, Jasjit, 2008. "Distributed R&D, cross-regional knowledge integration and quality of innovative output," Research Policy, Elsevier, vol. 37(1), pages 77-96, February.
    42. Xia, Li & Gao, Shuo & Wei, Jiuchang & Ding, Qiying, 2022. "Government subsidy and corporate green innovation - Does board governance play a role?," Energy Policy, Elsevier, vol. 161(C).
    43. Cristiana Tudor & Robert Sova, 2021. "On the Impact of GDP per Capita, Carbon Intensity and Innovation for Renewable Energy Consumption: Worldwide Evidence," Energies, MDPI, vol. 14(19), pages 1-25, October.
    44. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    45. Su, Hsin-Ning & Moaniba, Igam M., 2017. "Does innovation respond to climate change? Empirical evidence from patents and greenhouse gas emissions," Technological Forecasting and Social Change, Elsevier, vol. 122(C), pages 49-62.
    46. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, vol. 72(3), pages 285-318, July.
    47. Tombe, Trevor & Winter, Jennifer, 2015. "Environmental policy and misallocation: The productivity effect of intensity standards," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 137-163.
    48. Steurs, Geert, 1995. "Inter-industry R&D spillovers: What difference do they make?," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 249-276.
    49. Wonglimpiyarat, Jarunee, 2016. "Exploring strategic venture capital financing with Silicon Valley style," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 80-89.
    50. Wu, Zhanchi & Fan, Xiangjun & Zhu, Bangzhu & Xia, Jiahui & Zhang, Lin & Wang, Ping, 2022. "Do government subsidies improve innovation investment for new energy firms: A quasi-natural experiment of China's listed companies," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    51. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
    52. Leleux, Benoit & Surlemont, Bernard, 2003. "Public versus private venture capital: seeding or crowding out? A pan-European analysis," Journal of Business Venturing, Elsevier, vol. 18(1), pages 81-104, January.
    53. Alharbi, Samar S. & Al Mamun, Md & Boubaker, Sabri & Rizvi, Syed Kumail Abbas, 2023. "Green finance and renewable energy: A worldwide evidence," Energy Economics, Elsevier, vol. 118(C).
    54. Du, Min & Boateng, Agyenim, 2015. "State ownership, institutional effects and value creation in cross-border mergers & acquisitions by Chinese firms," International Business Review, Elsevier, vol. 24(3), pages 430-442.
    55. Kim, Seunghyok & Koo, Jamin & Lee, Chang Jun & Yoon, En Sup, 2012. "Optimization of Korean energy planning for sustainability considering uncertainties in learning rates and external factors," Energy, Elsevier, vol. 44(1), pages 126-134.
    56. Hyejun Kim & Jaeyong Song, 2017. "Filling institutional voids in emerging economies: The impact of capital market development and business groups on M&A deal abandonment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(3), pages 308-323, April.
    57. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    58. Zhang, Yuejia & Mayes, David Geoffrey, 2018. "The performance of governmental venture capital firms: A life cycle perspective and evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 162-185.
    59. Shikhar Ghosh & Ramana Nanda, 2010. "Venture Capital Investment in the Clean Energy Sector," Harvard Business School Working Papers 11-020, Harvard Business School.
    60. Scott J. Wallsten, 2000. "The Effects of Government-Industry R&D Programs on Private R&D: The Case of the Small Business Innovation Research Program," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 82-100, Spring.
    61. Jiao, Hao & Zhou, Jianghua & Gao, Taishan & Liu, Xielin, 2016. "The more interactions the better? The moderating effect of the interaction between local producers and users of knowledge on the relationship between R&D investment and regional innovation systems," Technological Forecasting and Social Change, Elsevier, vol. 110(C), pages 13-20.
    62. Afrifa, Godfred Adjapong & Tingbani, Ishmael & Yamoah, Fred & Appiah, Gloria, 2020. "Innovation input, governance and climate change: Evidence from emerging countries," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    63. Haitian Lu & Yi Tan & Hong Huang, 2013. "Why do venture capital firms exist: An institution-based rent-seeking perspective and Chinese evidence," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 921-936, September.
    64. Wang, Zilong & Wang, Xinbin, 2022. "Research on the impact of green finance on energy efficiency in different regions of China based on the DEA-Tobit model," Resources Policy, Elsevier, vol. 77(C).
    65. Siying Yang & Shunyu Ma & Jingjing Lu, 2022. "Can government venture capital guidance funds promote urban innovation? Evidence from China," Growth and Change, Wiley Blackwell, vol. 53(2), pages 753-770, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fabio Bertoni & Massimo G. Colombo & Anita Quas, 2019. "The Role of Governmental Venture Capital in the Venture Capital Ecosystem: An Organizational Ecology Perspective," Entrepreneurship Theory and Practice, , vol. 43(3), pages 611-628, May.
    2. Jianjun Xu & Lijie Yu & Rakesh Gupta, 2020. "Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process," Sustainability, MDPI, vol. 12(17), pages 1-24, August.
    3. Guerini, Massimiliano & Quas, Anita, 2016. "Governmental venture capital in Europe: Screening and certification," Journal of Business Venturing, Elsevier, vol. 31(2), pages 175-195.
    4. Alperovych, Yan & Groh, Alexander & Quas, Anita, 2020. "Bridging the equity gap for young innovative companies: The design of effective government venture capital fund programs," Research Policy, Elsevier, vol. 49(10).
    5. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    6. Thomas Standaert & Sophie Manigart, 2018. "Government as fund-of-fund and VC fund sponsors: effect on employment in portfolio companies," Small Business Economics, Springer, vol. 50(2), pages 357-373, February.
    7. Jeaneth Johansson & Malin Malmström & Joakim Wincent, 2021. "Sustainable Investments in Responsible SMEs: That’s What’s Distinguish Government VCs from Private VCs," JRFM, MDPI, vol. 14(1), pages 1-22, January.
    8. Annalisa Croce & Jose Martí & Carmelo Reverte, 2019. "The role of private versus governmental venture capital in fostering job creation during the crisis," Small Business Economics, Springer, vol. 53(4), pages 879-900, December.
    9. Bertoni, Fabio & Tykvová, Tereza, 2012. "Which form of venture capital is most supportive of innovation?," ZEW Discussion Papers 12-018, ZEW - Leibniz Centre for European Economic Research.
    10. Bertoni, Fabio & Tykvová, Tereza, 2013. "Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies," FZID Discussion Papers 69-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    11. Katarzyna Szkuta & Blagoy Stamenov & Anna Ianshyna, 2017. "Improving access to finance for young innovative enterprises with growth potential: evidence of impact on firms' outputs: Part 1. Equity instruments: lessons learned from policy evaluations," JRC Research Reports JRC109163, Joint Research Centre.
    12. Gao, Kang & Yuan, Yijun, 2022. "Government intervention, spillover effect and urban innovation performance: Empirical evidence from national innovative city pilot policy in China," Technology in Society, Elsevier, vol. 70(C).
    13. John Armour & Douglas Cumming, 2004. "The Legal Road To Replicating Silicon Valley," Working Papers wp281, Centre for Business Research, University of Cambridge.
    14. Christian Keuschnigg, 2008. "Tax Policy for Venture Capital Backed Entrepreneurship," University of St. Gallen Department of Economics working paper series 2008 2008-07, Department of Economics, University of St. Gallen.
    15. Colombo, Massimo G. & Croce, Annalisa & Guerini, Massimiliano, 2013. "The effect of public subsidies on firms’ investment–cash flow sensitivity: Transient or persistent?," Research Policy, Elsevier, vol. 42(9), pages 1605-1623.
    16. Fabio Bertoni & Massimo Colombo & Anita Quas, 2015. "The patterns of venture capital investment in Europe," Small Business Economics, Springer, vol. 45(3), pages 543-560, October.
    17. Engberg, Erik & Halvarsson, Daniel & Tingvall, Patrik, 2017. "Direct and Indirect Effects of Private- and Government Sponsored Venture Capital," Ratio Working Papers 288, The Ratio Institute.
    18. Bertoni, Fabio & Martí, Jose & Reverte, Carmelo, 2019. "The impact of government-supported participative loans on the growth of entrepreneurial ventures," Research Policy, Elsevier, vol. 48(1), pages 371-384.
    19. Buzzacchi, Luigi & Scellato, Giuseppe & Ughetto, Elisa, 2013. "The investment strategies of publicly sponsored venture capital funds," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 707-716.
    20. Bertoni, Fabio & Tykvová, Tereza, 2015. "Does governmental venture capital spur invention and innovation? Evidence from young European biotech companies," Research Policy, Elsevier, vol. 44(4), pages 925-935.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323006941. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.