Events

Professor David Y. Yang
Professor, Department of Economics
Harvard University

Global entrepreneurship funding ecosystem has traditionally been dominated by the developed nations, especially the U.S., until the rise of China as a venture investment powerhouse, unprecedented in the developing world. What are the international ramifications of China’s rise for emerging economies’ entrepreneurship landscape? We collect comprehensive data on global venture activities, and we document three sets of findings. First, as the Chinese venture industry rose in importance, the mixture of ventures in the emerging economies around the world more closely resembled China’s. Importantly, venture investment differentially increases in sectors that share greater underlying suitability with China, suggesting a spread of appropriate business across the emerging economies. Second, the increase in venture investments in emerging economies is driven by local investors and new firms whose business models more closely resembled those of their Chinese counterparts. Third, the increased venture investments in China-led sectors generate positive spillover in the emerging economies. Taken together, our findings suggest that the U.S.-benchmark approach in venture investment may have created sub-optimal investment outcomes in the emerging economies as the U.S. socioeconomic conditions may not be representative of the developing world. The rise of Chinese ventures offers an alternative approach to entrepreneurship and thus substantially increases the appropriateness of capital allocation and entrepreneurial activity in emerging economies.