A legitimacy-based view of the impact of government venture capital on startup innovation: Evidence from a transition economy

This study examines the role of government venture capital (GVC) on startup innovation in a transition economy context. Drawing on institutional theory, we advance a contextual view of GVC by proposing that GVC positively impacts the innovation of startups in transition economies by serving as a sociocognitive legitimating endorsement. Furthermore, our study offers a contingent framework by showing that GVC endorsement will be more meaningful for startups deficient in organizational sources of legitimacy, such as political ties and social prestige. Regression analyses using a longitudinal data of Chinese venture-backed biopharma and medical device startups founded during 2002–2017 offer broad support for our theory about the sociocognitive legitimating role of GVC in transition economy contexts.