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Venture Capital Networks in Southeast Asia: Network characteristics and cohesive subgroups

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  • Aleenajitpong, Natdanai
  • Leemakdej, Arnat

Abstract

Venture capital firms (VC) have encountered with uncertainty and risk of asymmetric information due to an investment in early-to-growth stage start-ups with technological base and high growth potential. Venture capital syndication network helps reduce a broad gap of information asymmetry in a venture capital investment. Moreover, network connections are found to be the success factor for venture capitalists under a lack of fully developed institutional environment in emerging market. Venture capital industry in Southeast Asia is nascent yet in demanding and fast growing. Despite a decline in the number of venture deals in the US, the deals keep surging in Southeast Asia (SEA), one of the most significant and dynamic propellers of the world economy. To develop the entrepreneurial ecosystem in SEA, it is interesting to examine how VC firms are connected to one another. Even though several literatures found some distinctive network characteristics amidst the US, European and Chinese venture capital market, the Southeast Asian has left unattended. In this paper, we initiate the network of venture capital firms among Southeast Asian nations and explore their relationships through social network analysis. The purposes of this study are to investigate the topological and statistical properties of VC network consisting of small-world behavior, power law distribution, and centrality measure such as degree, closeness, and betweenness. In addition, we classify various levels of connections into subnetworks and examine influential groups of VCs in Southeast Asia.

Suggested Citation

  • Aleenajitpong, Natdanai & Leemakdej, Arnat, 2021. "Venture Capital Networks in Southeast Asia: Network characteristics and cohesive subgroups," International Review of Financial Analysis, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finana:v:76:y:2021:i:c:s1057521921000946
    DOI: 10.1016/j.irfa.2021.101752
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    2. Gu, Jing & Zhang, Fujuan & Xu, Xun & Xue, Chaokai, 2023. "Stay or switch? The impact of venture capitalists' movement across network communities on enterprises’ innovation performance," Technovation, Elsevier, vol. 125(C).

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