PATENT SIGNALING AND VENTURE CAPITALISTS’ INVESTMENT BEHAVIORS IN CHINA

In recent years, China’s venture capital (VC) industry has experienced rapid growth. VC investments are widely believed to carry significant risks, primarily due to information asymmetry. As a result, VC firms continuously seek information signals to reduce these risks. This study examines the influence of patent signals on VC investment decisions in China, showing that the number of patents held by startups significantly increases the amount of VC investment they attract. VC firms tend to prioritize the quantity of patents, encouraging startups to enhance their technological capabilities. However, patents do not significantly impact the number of investing institutions, as most investments come from individual firms. While the influence of patent signals might vary across different types of investors, the study finds no evidence that patent signals affect the investment decisions of foreign or foreign-domestic joint VC firms regarding investment amounts.

DOI: https://doi.org/10.47743/rebs-2025-2-0001