Abstract
Utilizing a dataset of VC investment from 2005 to 2018, we investigate the relationship between air pollution and venture capital (VC) investment. We find that startups suffering severe air pollution receive less investment from VCs and experience a lower probability of financing from VCs. Our findings are robust to considering endogeneity concerns and various robustness checks. Moreover, air pollution is detrimental to startup innovation ability and entrepreneurial activities through which air pollution negatively affects VC investment. In response, VCs prefer to co-invest with other VCs to mitigate the adverse effect of air pollution. Our paper sheds new light on the impact of air pollution on the private financial markets.
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Data availability
Most of the basic data are publicly available, mainly from the National Aeronautics and Space Administration (NASA), the official website, https://disc.gsfc.nasa.gov/datasets/M2TMNXAER_V5.12.4/summary?keywords=Aerosols#, and The CVSource Database (www.cvsource.com.cn) provides detailed information about VC investment, Other data are calculated by authors, and the calculation method is shown in the text of this paper.
Notes
The AOD data are obtained from the Modern-Era Retrospective Analysis for Research and Applications version 2 (MERRA-2) and are available at https://disc.gsfc.nasa.gov/datasets/M2TMNXAER_V5.12.4/summary?keywords=Aerosols#.
The AOD data covers the whole country while ground-based pollution data cover only part of cities in China before 2013.
The CVSource Database is available at www.cvsource.com.cn.
Modern-Era Retrospective Analysis for Research and Applications records the 6-hour air temperature at different atmospheric layers. For each 6-hour period, we calculate the temperature change from the first to the second above-ground atmospheric layer. If the temperature change is positive, a thermal inversion occurs, and the difference in temperatures measures the strength of thermal inversions.
High-tech industries in China include electronic information technology, biotechnology, pharmaceutical manufacturing and so on.
Baidu is the biggest search engine in China and provides search indices for specific keywords that are analogous to Google Trends.
We face several challenges when compiling the list of startup firms from CVSource for matching with patent data. Before comparing patent assignee names and CVSource startup firm names, a set of pre-processing routines are implemented to clean and standardize names. We merge startup firms to patent assignees. Finally, we conduct a manual check to identify a potentially matched name pair accurately. The matching results are reported in Appendix 2, Table 14.
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This work was supported by the Natural Science Foundation of China (Grant numbers [grant numbers 72103127]).
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Tian Gan: methodology, investigation, formal analysis, validation, visualization. Yumin Li: conceptualization, data curation, formal analysis, investigation, writing-original draft. Yan Jiang: project administration, conceptualization, validation, supervision, writing-original draft
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Gan, T., Li, Y. & Jiang, Y. The impact of air pollution on venture capital: evidence from China. Environ Sci Pollut Res 29, 90615–90631 (2022). https://doi.org/10.1007/s11356-022-21972-7
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DOI: https://doi.org/10.1007/s11356-022-21972-7