We examine whether founders’ innovation competence facilitates fundraising. Based on a sample of private manufacturing firms in China established between 1987 and 2020, we find that firms with inventor – founders are more likely to receive venture capital (VC) investments. However, this finding applies only to founders with invention patents. Cross-sectional analysis shows that the positive association is more pronounced for high-tech firms and firms located in provinces with well-developed intellectual property markets. Additional analyses find that VCs invest in firms with inventor – founders at an earlier stage and that firms with inventor – founders are associated with greater growth in patents.
Hong et al. (Wed,) studied this question.