Performance of government venture capital (GVC): an Asian perspective

This article compares the exit performance of companies backed by government venture capital (GVC) with that of firms backed by independent venture capital (IVC). Using a sample of 3,817 firms from 9 Asian developing countries during a 26-year period (1991–2017), we run multinomial logistic regressions and initially show that GVC-backed firms are more likely to be financed in the early stage than IVC-backed firms are. In doing so, GVC absorbs the higher probability of an unsuccessful exit associated with firms financed in the early stage. In contrast, we find that in the expansion and later stages, GVC-backed firms perform better than IVC-backed firms. Overall, we show that GVC-backed firms outperform IVC-backed firms. These empirical findings are reinforced by several robustness checks. Thus, we challenge the hypothesis on GVC underperformance tested in the literature on other geographical areas. Finally, we provide evidence that mixed syndication (a combination of GVC and IVC) improves the exit performance of ventures.