Abstract: The research takes the listed firms invested by venture capital as samples, measures the spatial proximity from the two dimensions of location consistency and geographic distance, analyzes the influence mechanism and effect of spatial proximity on innovation mechanism of venture capital based on principal-agent theory. The results show that: First, the spatial proximity of venture capital events has a significant impact on the technological innovation of invested firms through influencing the screening effect and monitoring effect of venture capital. Second, location consistency can significantly improve the progressive innovation of the invested firms, whereas the increase of geographical distance will significantly reduce the breakthrough innovation of the invested firms. Third, threshold effect test shows that breakthrough innovation is more sensitive to the change of geographical distance. Since there are few previous literatures that use venture capital institutions as economic actors to analyze the impact of the spatial proximity characteristics of innovation mechanism of venture capital, the research’s conclusions enrich the relevant literature and provide a theoretical basis for understanding the innovation mechanism of venture capital from a spatial dimension.

Key words: spatial proximity, venture capital, technological innovation, geographical distance