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Divergent trajectories on frontier innovations: A comparison of international venture capital-invested ventures between China and the United States

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  • Sun, Sunny Li
  • Santos, Roberto S.
  • Qin, Lingling

Abstract

How do international venture capital (IVC)-invested ventures (IIVs) between the U.S. and China generate new knowledge differently and follow distinct growth trajectories? Given that venture capital (VC) is critical for financing frontier innovations among new ventures, comparing U.S. and Chinese IIVs is essential for informing national innovation policy. Based on the organizational ecology perspective, we propose that U.S. and Chinese new ventures have divergent trajectories in frontier innovations. We identify 1782 first-round IVC investments in U.S. and Chinese new ventures operating in the computer software, e-commerce, biotechnology, semiconductors, and artificial intelligence sectors between 2010 and 2020 along with their 2825 patents (317 Chinese patents and 2508 U.S. patents). Our findings indicate that Chinese IIVs exhibit greater variation in terms of technological distance, search scope, and knowledge coupling, compared to U.S. IIVs. However, Chinese IIVs’ frontier innovations have more divergent technological trajectories and attract fewer followers than U.S. IIVs, based on patent citations. In a firm-level analysis, we find that Chinese IIVs are less likely to receive a subsequent financing round. Further, IIVs with greater technological distance and search scope, and with higher impact patents, have more opportunities to receive the next round of funding.

Suggested Citation

  • Sun, Sunny Li & Santos, Roberto S. & Qin, Lingling, 2024. "Divergent trajectories on frontier innovations: A comparison of international venture capital-invested ventures between China and the United States," Technovation, Elsevier, vol. 137(C).
  • Handle: RePEc:eee:techno:v:137:y:2024:i:c:s0166497224001445
    DOI: 10.1016/j.technovation.2024.103094
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    More about this item

    Keywords

    International venture capital; International venture capital-invested venture; Innovation; Organizational ecology; Knowledge generation; Technological trajectories;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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