Using data on Shanghai and Shenzhen A-share listed companies from 2008 to 2022, Peng, Bumailikaimu, and Feng find venture capital significantly promotes enterprise digital transformation, surviving robustness and endogeneity tests. The effect is heterogeneous: state-owned and syndicated venture capital have stronger impacts on driving transformation than other VC types. The paper identifies three mechanisms VC uses: financial assistance, easing financing constraints and improving credit access; governance empowerment, improving management efficiency while curbing managerial myopia; and capability support, increasing R&D investment and innovation output. The authors also find a feedback loop, where digital transformation itself enhances the value-added role VC investors can play, creating market incentives that reinforce further transformation, which they frame as a win-win dynamic between capital markets and enterprises.

LPs and policymakers interested in China's capital markets get evidence that not all venture capital is equally effective at driving portfolio companies toward digitalization, since the paper specifically finds state-owned and syndicated VC outperform other structures on this outcome, a distinction that matters for anyone choosing between VC types when steering industrial policy or capital allocation decisions and priorities overall. The three-mechanism breakdown, financial assistance, governance empowerment, and capability support, gives researchers and practitioners a specific causal pathway to test or replicate in other markets rather than a single vague claim that VC helps innovation. The finding of a reinforcing feedback loop between VC and digital transformation is also useful for GPs building an investment thesis around portfolio companies undergoing digitalization.