Abstract: To enhance the independent innovation capability is the key to accelerate the transformation and upgrading of enterprises, transform China’s economic growth pattern and implement the strategy for innovation-driven development. By referring to the patent data, this paper investigates the impact of venture capital on the innovation capability of the innovative enterprises and its underlying mechanisms. The findings show that before IPO, there is no significant difference between the innovation capabilities of both the enterprises with and without venture investment background. However, after IPO, the former has more applications for invention patents and other patents, which indicates that the venture investment share holding can not only help to increase the number of achievements of corporate innovation, but also to improve the qualities of the innovative results. The venture capital has the effect of promoting innovations. Further analysis finds that it is the internal mechanism of the venture investment that can help the start-up enterprises to relieve their financing constraints, recruit high quality employees, and optimize their governance mechanisms.

Key words: venture investment; accredited?director; enterprise innovation; value-adding services; corporate governance