The Effect of Corporate Venture Capital on Labor Income Share: Evidence from China

This study examines the theoretical mechanism through which Corporate Venture Capital (CVC) functions in the distribution of corporate labor income. We aim to elucidate the manner in which CVC affects the labor income share of science and innovation enterprises. Listed companies of China's Growth Enterprise Board (GEM) and Science and Technology Innovation Board (STIB) serve as the study's samples for the years 2010–2022. The study investigates the mechanism of the role through empirical research and provides a comprehensive examination of the impact of CVC on the labor income share from a micro-level perspective. Empirical findings indicate the existence of a significant inverted U-shaped relationship between CVC shareholding and the labor income share of startups that have been invested. This indicates that CVC has the potential to elevate the labor income share up to a specific threshold; however, exceeding this threshold may result in an opposing effect. The analysis of the endogeneity and robustness of the empirical data constituted the foundation for this finding. The mechanism analysis indicates that CVC exerts an influence on the labor income share of businesses through three principal mechanisms: namely, by enhancing corporate governance, encouraging digitalization, and improving the quality of human capital. The relationship is moderated by media attention in an inverted U-shaped manner. Secondly, it is important to consider the regional and financial limitations that impact the manner in which CVC affects the income share of labor. To illustrate, the inverse 'U'-shaped correlation is more evident in eastern China and in organizations with fewer financial constraints. Subsequent investigation reveals a positive U-shaped relationship between the corporate pay gap and CVC holdings, indicating CVC remains a significant factor in reducing income inequality.