Does VC Investor Type Matter? Determinants and effects of VC backing for new firms in Japan

Author Name KATO Masatoshi (Kwansei Gakuin University) / Nicolas LEGENDRE (HEC Montreal) / YOSHIDA Hiroki (Keio University)
Creation Date/NO. December 2022 22-E-117
Research Project Developing an Entrepreneurial Ecosystem
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This study examines venture capital (VC) backing among new firms in Japan, exploring how the determinants and effects of VC backing vary depending on the VC investor type. We estimate the determinants of VC backing and find that new firms receiving investments from independent VCs tend to be larger, younger, and more innovative than non-VC-backed firms. However, the factors affecting investments from corporate, finance-affiliated, and government-funded VCs significantly differ from those affecting independent VCs. To explore the effect of VC backing, we construct a matched sample using propensity score matching. Furthermore, we estimate the average treatment effect of receiving VC investments to clarify whether new VC-backed firms achieve superior growth and innovation performance. The results indicate that investments from independent VC firms enhance the performance of new firms. However, we find no significant effect on new firm performance for other VC investor types.