The Fifth Plenary Session of the 19th CPC Central Committee emphasized that innovation should play a central role in the overall modernization of China and take self-reliance in science and technology as the strategic support of national development. The core of financial support for innovative development is to develop the multi-level capital market and improve the ability of innovative capital formation. Venture capital funds and equity investment funds, as the two major types of private equity funds, which can promote the formation of innovative capital? This paper studies the impact of venture capital funds and equity investment funds on the innovation level of listed companies in NEEQ supported by private equity investment from 2014 to 2018. It is found that venture capital funds can promote firm innovation more than equity investment funds. Further research shows that the effect of venture capital funds on innovation is more significant in high-tech industry, firms receiving investment in early stage, and firms supported by private fund managers. In addition, after using the Tobit model to regress, and adding the provincial venture capital fund availability of listed companies in NEEQ and other control variables, the above conclusions are still valid; after using the Poisson（Linear）regression with endogenous treatment effects, and using the Poisson model and the Tobit model for PSM samples to carry out the principal test and the group test, the above conclusions are still valid.
The main contributions are as follows: Firstly, based on the institutional background of China, this paper divides the private equity investment into venture capital funds and equity investment funds. It is found that compared with equity investment funds, venture capital funds have a significant role in promoting firm innovation. This paper supplements and expands the literature view on the factors influencing firm innovation. Secondly, this paper compares the impact of venture capital funds and growth capital funds on innovation behavior, which provides a new perspective for understanding the impact of these two types of investment funds on firm innovation behavior and enriches the literature on growth capital research. The conclusions of this paper will help policy-makers to clarify the distinction between venture capital funds and equity investment funds, and give full play to the role of venture capital investment focusing on investing early, investing small and investing in high technology. It has important policy implications for the government to formulate tax incentives and regulatory policies in the field of private equity funds.