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<p>This study examines the influence of venture capital on corporate innovation in South Korea between 2007 and 2020, a period marked by excess liquidity after the global financial crisis that complicates the assessment of VC’s effects. By adopting a comprehensive perspective, the analysis overcomes the self-selection bias often present in firm-level studies and provides more consistent evidence. The results confirm that VC positively contributes to innovation overall, while its impact varies by firm growth stage. VC is shown to play a pivotal role in fostering innovation in early-stage firms, but its effect diminishes as firms mature and increasingly prioritize commercialization, resulting in a reverse U-shaped pattern. These findings contribute to academic debates by offering one of the first systematic accounts that reconcile previously mixed evidence and clarify the conditions under which VC promotes innovation. The study also offers practical insights for policymakers and practitioners, highlighting the importance of targeted VC strategies and government-led efforts to shape an open economy where global integration is leveraged for both technological upgrading and sustained competitiveness. South Korea’s experience provides a distinctive example of how institutional settings mediate the broader role of VC in innovation-driven growth.</p>

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Unveiling the Enduring Debate: An Empirical analysis of Venture Capital's Impact on Innovation in South Korea

  • 期刊论文

  • 发表日期：

    2026年1月27日

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  • Chang Ho Moon,
  • Junseok Hwang

摘要

This study examines the influence of venture capital on corporate innovation in South Korea between 2007 and 2020, a period marked by excess liquidity after the global financial crisis that complicates the assessment of VC’s effects. By adopting a comprehensive perspective, the analysis overcomes the self-selection bias often present in firm-level studies and provides more consistent evidence. The results confirm that VC positively contributes to innovation overall, while its impact varies by firm growth stage. VC is shown to play a pivotal role in fostering innovation in early-stage firms, but its effect diminishes as firms mature and increasingly prioritize commercialization, resulting in a reverse U-shaped pattern. These findings contribute to academic debates by offering one of the first systematic accounts that reconcile previously mixed evidence and clarify the conditions under which VC promotes innovation. The study also offers practical insights for policymakers and practitioners, highlighting the importance of targeted VC strategies and government-led efforts to shape an open economy where global integration is leveraged for both technological upgrading and sustained competitiveness. South Korea’s experience provides a distinctive example of how institutional settings mediate the broader role of VC in innovation-driven growth.