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Network Impact on the Investment Strategy and Performance of Cross-Border Venture Capital Institutions in China

Author

Listed:
  • Xiaoli Wang

    (School of Management, Marist College, Poughkeepsie, NY 12601, USA)

  • Yi Tan

    (Antai College of Economics & Management, Shanghai Jiaotong University, Shanghai 200030, China)

Abstract

In this paper, we investigate whether the VC institutions’ position in the network affects their investment strategies and performance. Our results show that network location has a negative correlation with geographic concentration index, industry concentration index, and stage concentration index, which indicates that the higher the network position of the cross-border VC institutions, the higher the degree of geographical diversification, the wider the industry diversification, and the higher the investment stage diversification of their investments. In addition, our results show that the relationship between network position and the VC’s performance is not simply linear but rather an inverted U-shaped correlation. When the network location is lower than the critical value, higher network location positively improves the VC’s investment performance; however, when the network location is higher than the critical value, then the relationship is reversed.

Suggested Citation

  • Xiaoli Wang & Yi Tan, 2024. "Network Impact on the Investment Strategy and Performance of Cross-Border Venture Capital Institutions in China," JRFM, MDPI, vol. 17(9), pages 1-20, August.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:9:p:384-:d:1466679
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    References listed on IDEAS

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    1. Nahata, Rajarishi & Hazarika, Sonali & Tandon, Kishore, 2014. "Success in Global Venture Capital Investing: Do Institutional and Cultural Differences Matter?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(4), pages 1039-1070, August.
    2. Yael V. Hochberg & Alexander Ljungqvist & Yang Lu, 2007. "Whom You Know Matters: Venture Capital Networks and Investment Performance," Journal of Finance, American Finance Association, vol. 62(1), pages 251-301, February.
    3. Bygrave, William D., 1988. "The structure of the investment networks of venture capital firms," Journal of Business Venturing, Elsevier, vol. 3(2), pages 137-157.
    4. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
    Full references (including those not matched with items on IDEAS)

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