Investing with the Government: A Field Experiment in China

Emanuele Colonnelli, Bo Li, Ernest Liu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


We conduct a large-scale, nondeceptive field experiment to elicit preferences for government participation in China’s venture capital and private equity market. Our main result is that the average firm dislikes investors with government ties. We show that such dislike is not present with government-owned firms and that this dislike is highest with best-performing firms. Additional results and surveys suggest that political interference in decision-making is the leading reason why government investors are unattractive to private firms. Overall, our findings point to the limits of a model of “state capitalism” that strongly relies on the complementarity between private firms and government capital to drive highgrowth entrepreneurship and innovation.

Original languageEnglish (US)
Pages (from-to)248-294
Number of pages47
JournalJournal of Political Economy
Issue number1
StatePublished - Jan 1 2024
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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