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Beggars or choosers? Lead venture capitalists and the impact of reputation on syndicate partner selection in international settings

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  • Plagmann, Carolin
  • Lutz, Eva

Abstract

We investigate the importance of reputation for lead venture capitalists’ choice of international and domestic syndicate partners for domestic deals. Our study is based on a novel dataset of global syndicated investments covering the period 2005 to 2014 and comprising 46,101 triads among lead investors, syndicate partners, and portfolio firms. We find reputation to be more relevant in selecting cross-border co-investors than local co-investors. The results are consistent for our international and domestic reputation scores as well as for single reputation components such as equity invested, number of investments, or number of IPO exits. In addition, we show that the reputation of the lead investor matters in international syndicate partner selection. Highly reputed venture capitalists seem to follow an intricate decision model in which they carefully choose cross-border partners over domestic ones.

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  • Plagmann, Carolin & Lutz, Eva, 2019. "Beggars or choosers? Lead venture capitalists and the impact of reputation on syndicate partner selection in international settings," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 359-378.
    • Handle: RePEc:eee:jbfina:v:100:y:2019:i:c:p:359-378
    DOI: 10.1016/j.jbankfin.2019.01.007
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    3. Liping Li & Qisheng Chen & Ximeng Jia & Jin Chen & Enrique Herrera-Viedma, 2024. "The collusion behavior of venture capitalists and entrepreneurs based on “guanxi”: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-18, December.
    4. Amir Pezeshkan & Adam Smith & Stav Fainshmidt & Anil Nair, 2022. "A neo-configurational institutional analysis of international venture capital attractiveness and performance: insights for Asia-Pacific," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 365-393, June.
    5. Alperovych, Yan & Divakaruni, Anantha & Manigart, Sophie, 2022. "Lending when relationships are scarce: The role of information spread via bank networks," Journal of Corporate Finance, Elsevier, vol. 73(C).
    6. Hu, Xiao & Wang, Jiayi & Wu, Banggang & Xiang, Shuting, 2023. "Venture capital firms' lead orientation and entry to new investment markets," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    7. Colombo, Massimo G. & Guerini, Massimiliano & Hoisl, Karin & Zeiner, Nico M., 2023. "The dark side of signals: Patents protecting radical inventions and venture capital investments," Research Policy, Elsevier, vol. 52(5).
    8. Hu, Xiao & Wang, Jiayi & Wu, Banggang, 2022. "Venture capital firms’ lead orientation, network position, and selection of familiar syndicate partners," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    International syndication; Venture capital; Reputation; Alliance formation;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F39 - International Economics - - International Finance - - - Other
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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