Complementarity or substitution? The impact of the coexistence of corporate and independent venture capitalists on innovation in Chinese firms

Research into corporate innovation generally focuses on the specific effects of corporate and independent venture capitalists (CVCs and IVCs). We explore whether CVCs and IVCs complement or substitute each other in innovative firms and how their interactions affect firm innovation, based on the notions of complementary assets and institutional logic. Using data from innovative firms listed in China, we find evidence of a complementary relationship between CVCs and IVCs and show that their coexistence significantly enhances firm innovation. Furthermore, our results show that the coexistence of government CVCs (GCVCs) and government IVCs (GIVCs) leads to better innovation performance, although their individual support also facilitates firm innovation. We also find that the coexistence of CVCs and IVCs contributes more to innovation in non-state-owned firms. Moreover, we find that their coexistence promotes firm innovation by mitigating agency problems. These findings contribute to a deeper understanding of the interactions between CVCs and IVCs.