Finance

Emerging markets

Business

Creativity

Open innovation

Marketing

Social venture capital

Political science

China

Economics

Originality

Venture capital

Absorptive capacity

Incentive

Market economy

Industrial organization

European Journal of Innovation Management

Purpose The study aims to empirically study the effect of venture capital on open innovation of China's enterprises. Design/methodology/approach This paper selects China's A-share listed companies on the small and medium-sized enterprises (SMEs) board and the Growth Enterprise Market from 2014 to 2018 as research samples to empirically study the effect of venture capital on open innovation of China's enterprises. Findings The authors find that venture capital can significantly promote open innovation of enterprises. This promoting effect is more significant when the venture capital institutions have profounder industry experience, higher shareholding ratio and are syndicated. Further research finds that venture capital mainly promotes open innovation through three mechanisms: increasing monetary funds, improving absorptive capacity and strengthening executive incentives, and the effect of venture capital on open innovation is significantly different under the conditions of different regions, industries and property rights. Originality/value This paper not only reveals the effect of venture capital on enterprises' open innovation and the specific mechanism, but also provides empirical evidence for emerging economies to build a national innovation ecosystem and make use of capital markets to accelerate innovation strategies.

Does venture capital help to promote open innovation practice? Evidence from China