IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i15p4126-d253205.html
   My bibliography  Save this article

Are Distances Barriers to Sustainability for Venture Capital Syndication?

Author

Listed:
  • Bing Liu

    (School of Tourism Management, Sun Yat-sen University, Guangzhou 510275, China)

  • Hui Jiang

    (School of Tourism Management, Sun Yat-sen University, Guangzhou 510275, China)

Abstract

This study aimed to explore how both geographic and industry distances, as potential barriers, affect the sustainability for venture capital (VC) syndication. Specifically, we examined the influences of initial public offering (IPO) activity as a market environment factor and foreign VC as a firm character on VC syndication in the tourism and hospitality sectors, together with the consideration of moderating effects of geographic and industry distances. Using a purposefully developed dataset of VC deals made in China, involving 645 VC firms and 592 VC-backed venture companies from 1991 to 2017, the empirical analysis indicated that both IPO activity and foreign VC were positively related to VC syndication. Geographic distance was found to negatively moderate the relationship between IPO activity and VC syndication; on the contrary, industry distance was found to positively moderate the relationship between foreign VC and VC syndication. These findings revealed that distances are not necessarily barriers to sustainability for VC syndication. This study provided an integrated view on the factors and barriers influencing the sustainability of VC syndication in tourism and hospitality sectors. It advances the knowledge of VC syndication in tourism investment and sheds light on sustainable entrepreneurship in tourism and hospitality.

Suggested Citation

  • Bing Liu & Hui Jiang, 2019. "Are Distances Barriers to Sustainability for Venture Capital Syndication?," Sustainability, MDPI, vol. 11(15), pages 1-18, July.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:15:p:4126-:d:253205
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/15/4126/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2071-1050/11/15/4126/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ranjay Gulati, 1999. "Network location and learning: the influence of network resources and firm capabilities on alliance formation," Strategic Management Journal, Wiley Blackwell, vol. 20(5), pages 397-420, May.
    2. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
    3. Gompers, Paul & Kovner, Anna & Lerner, Josh & Scharfstein, David, 2008. "Venture capital investment cycles: The impact of public markets," Journal of Financial Economics, Elsevier, vol. 87(1), pages 1-23, January.
    4. Progress Choongo & Elco Van Burg & Leo J. Paas & Enno Masurel, 2016. "Factors Influencing the Identification of Sustainable Opportunities by SMEs: Empirical Evidence from Zambia," Sustainability, MDPI, vol. 8(1), pages 1-24, January.
    5. T. Vanacker & V. Collewaert & I. Paeleman, 2013. "The relationship between slack resources and the performance of entrepreneurial firms: The role of venture capital and angel investors," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/837, Ghent University, Faculty of Economics and Business Administration.
    6. Gompers, Paul A. & Mukharlyamov, Vladimir & Xuan, Yuhai, 2016. "The cost of friendship," Journal of Financial Economics, Elsevier, vol. 119(3), pages 626-644.
    7. Chang, Sea Jin, 2004. "Venture capital financing, strategic alliances, and the initial public offerings of Internet startups," Journal of Business Venturing, Elsevier, vol. 19(5), pages 721-741, September.
    8. Lockett, Andy & Wright, Mike, 2001. "The syndication of venture capital investments," Omega, Elsevier, vol. 29(5), pages 375-390, October.
    9. Wang, Lanfang & Wang, Susheng, 2012. "Economic freedom and cross-border venture capital performance," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 26-50.
    10. Haber, Sigal & Reichel, Arie, 2007. "The cumulative nature of the entrepreneurial process: The contribution of human capital, planning and environment resources to small venture performance," Journal of Business Venturing, Elsevier, vol. 22(1), pages 119-145, January.
    11. Dirk De Clercq & Dimo Dimov, 2008. "Internal Knowledge Development and External Knowledge Access in Venture Capital Investment Performance," Journal of Management Studies, Wiley Blackwell, vol. 45(3), pages 585-612, May.
    12. James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture‐Capital Syndication: Improved Venture Selection vs. The Value‐Added Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 423-452, September.
    13. Gompers, Paul A, 1995. "Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-1489, December.
    14. Dimov, Dimo & Milanov, Hana, 2010. "The interplay of need and opportunity in venture capital investment syndication," Journal of Business Venturing, Elsevier, vol. 25(4), pages 331-348, July.
    15. Yuhuan Jin & Sheng Zhang, 2019. "Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis," Sustainability, MDPI, vol. 11(5), pages 1-15, March.
    16. Dai, Na & Jo, Hoje & Kassicieh, Sul, 2012. "Cross-border venture capital investments in Asia: Selection and exit performance," Journal of Business Venturing, Elsevier, vol. 27(6), pages 666-684.
    17. Hall, Jeremy K. & Daneke, Gregory A. & Lenox, Michael J., 2010. "Sustainable development and entrepreneurship: Past contributions and future directions," Journal of Business Venturing, Elsevier, vol. 25(5), pages 439-448, September.
    18. Weilei (Stone) Shi & Sunny Li Sun & Mike W. Peng, 2012. "Sub-National Institutional Contingencies, Network Positions, and IJV Partner Selection," Journal of Management Studies, Wiley Blackwell, vol. 49(7), pages 1221-1245, November.
    19. Julie Juan Li & Laura Poppo & Kevin Zheng Zhou, 2008. "Do managerial ties in China always produce value? Competition, uncertainty, and domestic vs. foreign firms," Strategic Management Journal, Wiley Blackwell, vol. 29(4), pages 383-400, April.
    20. Henry Chen & Paul Gompers & Anna Kovner & Josh Lerner, 2010. "Buy Local? The Geography of Venture Capital," NBER Chapters, in: Cities and Entrepreneurship, National Bureau of Economic Research, Inc.
    21. D. De Clercq & D. P. Dimov, 2004. "Explaining venture capital firms’ syndication behavior: A longitudinal study," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/279, Ghent University, Faculty of Economics and Business Administration.
    22. Wang, Pengfei, 2017. "Syndication and Foreignness: Venture Capital Investments in Emerging and Developed Markets," Journal of International Management, Elsevier, vol. 23(1), pages 1-15.
    23. Lerner, Miri & Haber, Sigal, 2001. "Performance factors of small tourism ventures: The interface of tourism, entrepreneurship and the environment," Journal of Business Venturing, Elsevier, vol. 16(1), pages 77-100, January.
    24. Tian, Xuan, 2011. "The causes and consequences of venture capital stage financing," Journal of Financial Economics, Elsevier, vol. 101(1), pages 132-159, July.
    25. Sarah Fitz-Koch & Mattias Nordqvist & Sara Carter & Erik Hunter, 2018. "Entrepreneurship in the Agricultural Sector: A Literature Review and Future Research Opportunities," Entrepreneurship Theory and Practice, , vol. 42(1), pages 129-166, January.
    26. Mark S. Seasholes & Ning Zhu, 2010. "Individual Investors and Local Bias," Journal of Finance, American Finance Association, vol. 65(5), pages 1987-2010, October.
    27. 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.
    28. Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
    29. David Devigne & Tom Vanacker & Sophie Manigart & Ine Paeleman, 2013. "The role of domestic and cross-border venture capital investors in the growth of portfolio companies," Small Business Economics, Springer, vol. 40(3), pages 553-573, April.
    30. Markus M. Mäkelä & Markku V. J. Maula, 2008. "Attracting cross-border venture capital: the role of a local investor," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 20(3), pages 237-257, May.
    31. Seungwha (Andy) Chung & Harbir Singh & Kyungmook Lee, 2000. "Complementarity, status similarity and social capital as drivers of alliance formation," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 1-22, January.
    32. Cumming, Douglas & Johan, Sofia Atiqah binti, 2008. "Preplanned exit strategies in venture capital," European Economic Review, Elsevier, vol. 52(7), pages 1209-1241, October.
    33. Yanfeng Zheng & Jun Xia, 2018. "Resource Dependence and Network Relations: A Test of Venture Capital Investment Termination in China," Journal of Management Studies, Wiley Blackwell, vol. 55(2), pages 295-319, March.
    34. Sophie Manigart & Andy Lockett & Miguel Meuleman & Mike Wright & Hans Landström & Hans Bruining & Philippe Desbrières & Ulrich Hommel, 2006. "Venture Capitalists' Decision to Syndicate," Post-Print halshs-00078062, HAL.
    35. Dimov, Dimo P. & Shepherd, Dean A., 2005. "Human capital theory and venture capital firms: exploring "home runs" and "strike outs"," Journal of Business Venturing, Elsevier, vol. 20(1), pages 1-21, January.
    36. Guo, Haifeng & Brooks, Robert & Shami, Roland, 2010. "Detecting hot and cold cycles using a Markov regime switching model--Evidence from the Chinese A-share IPO market," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 196-210, April.
    37. Petty, Jeffrey S. & Gruber, Marc, 2011. ""In pursuit of the real deal": A longitudinal study of VC decision making," Journal of Business Venturing, Elsevier, vol. 26(2), pages 172-188, March.
    38. Qianwei Ying & Hazrat Hassan & Habib Ahmad, 2019. "The Role of a Manager’s Intangible Capabilities in Resource Acquisition and Sustainable Competitive Performance," Sustainability, MDPI, vol. 11(2), pages 1-20, January.
    39. Joseph P. H. Fan & T. J. Wong & Tianyu Zhang, 2013. "Institutions and Organizational Structure: The Case of State-Owned Corporate Pyramids," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(6), pages 1217-1252, December.
    40. Cumming, Douglas & Dai, Na, 2010. "Local bias in venture capital investments," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 362-380, June.
    41. Christian Hopp, 2010. "When do venture capitalists collaborate? Evidence on the driving forces of venture capital syndication," Small Business Economics, Springer, vol. 35(4), pages 417-431, November.
    42. Xuan Tian, 2011. "The Role of Venture Capital Syndication in Value Creation for Entrepreneurial Firms," Review of Finance, European Finance Association, vol. 16(1), pages 245-283.
    43. Truls Erikson & Nicolai S Løvdal & Arild Aspelund, 2015. "Entrepreneurial Judgment and Value Capture, the Case of the Nascent Offshore Renewable Industry," Sustainability, MDPI, vol. 7(11), pages 1-14, November.
    44. Nicola Bellantuono & Pierpaolo Pontrandolfo & Barbara Scozzi, 2016. "Capturing the Stakeholders’ View in Sustainability Reporting: A Novel Approach," Sustainability, MDPI, vol. 8(4), pages 1-12, April.
    45. Dirk De Clercq & Dimo Dimov, 2004. "Explaining venture capital firms' syndication behaviour: A longitudinal study," Venture Capital, Taylor & Francis Journals, vol. 6(4), pages 243-256, October.
    46. Tom Vanacker & Veroniek Collewaert & Ine Paeleman, 2013. "The Relationship between Slack Resources and the Performance of Entrepreneurial Firms: The Role of Venture Capital and Angel Investors," Journal of Management Studies, Wiley Blackwell, vol. 50(6), pages 1070-1096, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ruling Zhang & Zengrui Tian & Killian J. McCarthy & Xiao Wang & Kun Zhang, 2023. "Application of machine learning techniques to predict entrepreneurial firm valuation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(2), pages 402-417, March.
    2. Ruling Zhang & Killian J. McCarthy & Xiao Wang & Zengrui Tian, 2021. "How Does Network Structure Impact Follow-On Financing through Syndication? Evidence from the Renewable Energy Industry," Sustainability, MDPI, vol. 13(7), pages 1-23, April.
    3. Chris Roberts & Joel Reynolds & Mary Jo Dolasinski, 2022. "Meta-Analysis of Tourism Sustainability Research: 2019–2021," Sustainability, MDPI, vol. 14(6), pages 1-18, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuejia Zhang, 2018. "Gain or pain? New evidence on mixed syndication between governmental and private venture capital firms in China," Small Business Economics, Springer, vol. 51(4), pages 995-1031, December.
    2. Block, Jörn H. & Fisch, Christian O. & Obschonka, Martin & Sandner, Philipp G., 2019. "A personality perspective on business angel syndication✰," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 306-327.
    3. Zhiyi Qiu & Rong Chen & Ye Yang, 2021. "Going Abroad, Friends on Board: Cross-Border Venture Capital and Syndication Strategy in China," SAGE Open, , vol. 11(2), pages 21582440211, April.
    4. Kshitija Joshi & Deepak Chandrashekar & Alexander Brem & Kirankumar S. Momaya, 2019. "Foreign Venture Capital Firms in a Cross-Border Context: Empirical Insights from India," Sustainability, MDPI, vol. 11(22), pages 1-20, November.
    5. 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.
    6. Bonini, Stefano & Capizzi, Vincenzo & Zocchi, Paola, 2019. "The performance of angel-backed companies," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 328-345.
    7. Axel Buchner & Susanne Espenlaub & Arif Khurshed & Abdulkadir Mohamed, 2018. "Cross-border venture capital investments: The impact of foreignness on returns," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(5), pages 575-604, July.
    8. Liu, Yu & Maula, Markku, 2021. "Contextual status effects: The performance effects of host-country network status and regulatory institutions in cross-border venture capital," Research Policy, Elsevier, vol. 50(5).
    9. Nahata, Rajarishi, 2019. "Success is good but failure is not so bad either: Serial entrepreneurs and venture capital contracting," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 624-649.
    10. Tereza Tykvová, 2018. "Venture capital and private equity financing: an overview of recent literature and an agenda for future research," Journal of Business Economics, Springer, vol. 88(3), pages 325-362, May.
    11. Violetta Bacon-Gerasymenko & Jonathan D. Arthurs & Sam Y. Cho, 2020. "How and When Investment Horizons Determine Venture Capital Firms’ Attention Breadth to Portfolio Companies," Entrepreneurship Theory and Practice, , vol. 44(3), pages 475-503, May.
    12. Munari, Federico & Toschi, Laura, 2015. "Assessing the impact of public venture capital programmes in the United Kingdom: Do regional characteristics matter?," Journal of Business Venturing, Elsevier, vol. 30(2), pages 205-226.
    13. Daniel Hain & Sofia Johan & Daojuan Wang, 2016. "Determinants of Cross-Border Venture Capital Investments in Emerging and Developed Economies: The Effects of Relational and Institutional Trust," Journal of Business Ethics, Springer, vol. 138(4), pages 743-764, November.
    14. Antonia Nörthemann, 2023. "Industry-specific specialization in venture capitalists’ internationalization decisions," Journal of Business Economics, Springer, vol. 93(5), pages 891-927, July.
    15. Kshitija Joshi, 2018. "Managing the risks from high-tech Investments in India: differential strategies of foreign and domestic venture capital firms," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-26, December.
    16. Chemmanur, Thomas J. & Hull, Tyler J. & Krishnan, Karthik, 2016. "Do local and international venture capitalists play well together? The complementarity of local and international venture capitalists," Journal of Business Venturing, Elsevier, vol. 31(5), pages 573-594.
    17. Shuangshuang Kong & Miwako Nitani & Allan Riding, 2016. "Cross-border VC investment in Canadian firms: implications for exit patterns," Venture Capital, Taylor & Francis Journals, vol. 18(1), pages 63-93, January.
    18. Zhang, Jing & Zhang, Wei & Schwab, Andreas, 2024. "Interorganizational triads for foreign-market entry: Partnerships among Western, bridge-economy, and local VCs in Mainland China," Journal of Business Venturing, Elsevier, vol. 39(1).
    19. Ying Sophie Huang & Buhui Qiu & Jiajia Wu & Juan Yao, 2023. "Institutional distance, geographic distance, and Chinese venture capital investment: do networks and trust matter?," Small Business Economics, Springer, vol. 61(4), pages 1795-1844, December.
    20. Guerini, Massimiliano & Quas, Anita, 2016. "Governmental venture capital in Europe: Screening and certification," Journal of Business Venturing, Elsevier, vol. 31(2), pages 175-195.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:15:p:4126-:d:253205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.