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| Can Corporate Limited Partners Provide Patient Capital? Evidence from China's Private Equity Market |
| ZHOU Xiangyi, YAO Yao
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| Jinhe Center for Economic Research, Xi’an Jiaotong University; PBC School of Finance, Tsinghua University |
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Abstract In recent years, providing long-term and stable funding for technological innovation has become an important issue in China. Early-stage technology firms usually face long R&D cycles, high investment needs, and high commercialization risks, and therefore rely on patient capital that focuses on long-term value rather than short-term returns. Whether an investment can be regarded as patient capital depends fundamentally on whether investors pursue long-term value rather than short-term gains. Non-financial firms are important investors in China's private equity market, but existing studies mainly focus on corporate venture capital (CVC), namely direct investments in startups for strategic purposes. Much less is known about non-financial firms’ role as limited partners (LPs) in venture capital funds. This paper examines whether corporate LPs can provide patient capital, how this role differs across different types of corporate LPs, and how their investment performance varies.
Existing studies often measure patient capital based on investors’ holding periods, turnover, or governance participation in secondary markets. In private equity markets, however, actual holding periods are often affected by IPO approval procedures, exit channels, and capital market cycles. Therefore, they may not accurately reflect investors’ subjective patience. Accordingly, this paper starts from investors’ active choice of project types and uses the share of early-stage technology projects invested in by LP-backed funds as the main measure of LP patience.
This paper collects LP information, fund investment and exit events from the Zero2IPO database, a leading commercial database on private equity investment in China, and constructs an LP-fund level dataset from 2000 to 2022. It then obtains granted invention patent data from the China National Intellectual Property Administration and matches them with corporate LPs, portfolio firms, and CVC parent companies. The comparison between CVC and corporate LP investments shows that CVC emphasizes deep technological and strategic collaboration with portfolio firms, while corporate LP investment is broader in nature. Specifically, startups backed by corporate LPs have lower technological similarity with the LPs themselves, but higher shares of early-stage and technology-oriented projects.
The empirical results show that corporate LP-backed funds invest more in early-stage technology projects than funds backed by non-corporate LPs, suggesting that corporate LPs are more patient. This pattern is even stronger among high-technology corporate LPs, whose funds allocate more to early-stage and technology-oriented projects, and invest in startups with higher innovation intensity. Although state-owned enterprise (SOE) LPs do not show a stronger preference for early-stage technology projects overall, those SOE LPs in high-technology industries clearly favor early-stage technology projects. As for performance, funds backed by high-technology corporate LPs have lower exit and IPO rates. Further analysis shows their reinvestment decisions are weakly related to short-term financial outcomes such as exit and IPO rates, consistent with their strategic investment motives.
This paper makes two main contributions. First, it provides evidence on the sources of patient capital in China's private equity market. By measuring LP patience with the share of early-stage technology projects invested by LP-backed funds, the paper shows that high-technology corporate LPs are the most patient, and that state-owned corporate LPs in high-technology industries also tend to support early-stage technology projects. Second, the paper extends the literature on non-financial firms’ participation in private equity. By comparing CVC with corporate LP investment, it shows that CVC focuses more on technological and strategic synergies, while corporate LP investment is broader in scope, helping explain firms’ motives for investing as LPs.
Based on these findings, this paper offers three policy implications. First, high-technology state-owned enterprises should be encouraged to act as LPs in early-stage technology funds and support portfolio firms with industrial resources, while adopting longer evaluation horizons for strategic projects. Second, tax incentives should be provided to corporate LPs investing in early-stage hard-tech firms to improve long-term returns and guide capital toward key sectors. Third, secondary transfer and exit mechanisms should be improved to reduce liquidity pressure on corporate LPs and strengthen their ability to continuously support early-stage technological innovation.
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Received: 03 March 2025
Published: 06 August 2026
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