Spatial dynamics and determinants of sustainable finance: Evidence from venture capital investment in China

Widely regarded as an efficient source to finance innovative activities and sustainable growth, venture capital has achieved a remarkable development since the 1980s. By employing a unique city-level panel dataset, this study first illustrates the locational dynamics of venture capital investment in China, while empirically investigating major socio-economic drivers of China's venture capital activities. We find non-trivial spatial spillovers of venture capital activities featured by regional imbalance, and identify government intervention, exit opportunity, human capital accumulation, new invention and transport infrastructure as five major influential factors for the formation and evolvement of local venture capital activities. Finally, we show the critical role of international venture capital and domestic institutional factors in shaping the venture capital industry in China. The study deepens the understanding of distributional and operational patterns on China's venture capital market, and raises multiple implications for entrepreneurs and policy makers on the efficient planning of venture capital activities in large developing economies. (C) 2019 Elsevier Ltd. All rights reserved.