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Syndication through social embeddedness: A comparison of foreign, private and state-owned venture capital (VC) firms

Author

Listed:
  • Jar-Der Luo

    (Tsinghua University)

  • Ke Rong

    (Tsinghua University)

  • Kunhao Yang

    (Tsinghua University)

  • Rong Guo

    (Chinese Academy of Science and Technology for Development (CASTED))

  • YaQi Zou

    (Tsinghua University)

Abstract

This paper explores the different syndication behavior in various types of Chinese venture capitals (VC), in particular it focuses on foreign, private-owned and state-owned VC firms and these firms’ behavior when faced with institutional uncertainties. Mixed methods data analysis was conducted using the Simuton database of 1,173 VC firms and snowball interviews were also conducted in the Chinese state-owned and private-owned VCs as well as foreign VCs. Findings indicate foreign VC investors are more willing to build much denser relationships than those of Chinese state-owned and private VC firms in order to overcome the uncertainty. This result provides additional evidence that adopting close relationships or a guanxi-based (informal social network) strategy does not only depend on cultural issues such as East Asian culture, but also on high institutional uncertainty. Furthermore, this paper develops four propositions on how VC firms establish syndication influenced by high institutional uncertainty. Finally, the conclusion and discussion sections put forward implications to VC companies about how informal social networks facilitate the internationalization process and growth in foreign markets.

Suggested Citation

  • Jar-Der Luo & Ke Rong & Kunhao Yang & Rong Guo & YaQi Zou, 2019. "Syndication through social embeddedness: A comparison of foreign, private and state-owned venture capital (VC) firms," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 499-527, June.
    • Handle: RePEc:kap:asiapa:v:36:y:2019:i:2:d:10.1007_s10490-017-9561-9
    DOI: 10.1007/s10490-017-9561-9
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    3. Peter Ping Li & En Xie, 2019. "The unique research on the informal ties and social networks in East Asia: Diverse perspectives and new research agenda," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 305-319, June.
    4. 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.
    5. Dong, Weijia & Li, Ye & Lv, Xin & Yu, Chang, 2021. "How does venture capital spur the innovation of environmentally friendly firms? Evidence from China," Energy Economics, Elsevier, vol. 103(C).
    6. 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.
    7. Abosag, Ibrahim & Yen, Dorothy Ai-wan & Barnes, Bradley R. & Gadalla, Eman, 2021. "Rethinking guanxi and performance: Understanding the dark side of Sino–U.S. business relationships," International Business Review, Elsevier, vol. 30(4).
    8. Jiani Wang & Su Chen & William Scheela, 2023. "Foreign venture capital investing strategies in transition economies: The case of China," Asia Pacific Journal of Management, Springer, vol. 40(4), pages 1481-1524, December.
    9. Feng, Bing & Sun, Kaiyang & Zhong, Ziqi & Chen, Min, 2021. "The internal connection analysis of information sharing and investment performance in the venture capital network community," LSE Research Online Documents on Economics 112731, London School of Economics and Political Science, LSE Library.
    10. Douglas Cumming & Satish Kumar & Weng Marc Lim & Nitesh Pandey, 2023. "Mapping the venture capital and private equity research: a bibliometric review and future research agenda," Small Business Economics, Springer, vol. 61(1), pages 173-221, June.
    11. Keith D. Brouthers & Liang Chen & Sali Li & Noman Shaheer, 2022. "Charting new courses to enter foreign markets: Conceptualization, theoretical framework, and research directions on non-traditional entry modes," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(9), pages 2088-2115, December.

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