My colleague Lin Lin and I have a working paper titled “Venture Capital In China And India: Does Business Form Matter?”. The abstract is as follows:
This paper re-evaluates the importance of business organizational forms with regard to venture capital funds by exploring two major Asian markets, China and India. Evidence suggests that the limited partnership is the leading business form among Chinese venture capital funds. On the other hand, Indian venture capital funds are predominantly organized as private non-charitable trusts. These findings challenge the orthodox view that the limited partnership is the preferred business form for venture capital funds. Instead, Indian venture capital funds have used the trust vehicle effectively and regard it as a functional equivalent to limited partnerships. This paper argues that the choice of business form is not the sole determinant of a vibrant venture capital market due to the presence of multiple functional equivalents that can substantially satisfy the goals of investors and fund managers. This paper advocates for a more nuanced analysis that takes into account peculiar local factors when considering if a particular business form should be introduced to facilitate the development of a venture capital market.