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Navigating investment decisions with social connectedness : Implications for venture capital

Author

Listed:
  • Giang Nguyen

    (EM - EMLyon Business School)

  • My Nguyen
  • Anh Viet Pham
  • Man Duy Marty Pham

Abstract

"This study examines how the geographical structure of social networks shapes venture capital (VC) investment decisions. We find that VC firms invest more in portfolio companies in socially connected regions. The effect is more pronounced among independent, smaller, less reputable, early–stage–focused VC firms and those not from a VC hub. We further document that social connectedness lowers the likelihood of a successful exit since it induces VC firms to undertake suboptimal investment decisions. Overall, our findings highlight the role of social connectedness in constituting the geographical differences in VC firms' capital allocation and investment outcomes."

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  • Giang Nguyen & My Nguyen & Anh Viet Pham & Man Duy Marty Pham, 2023. "Navigating investment decisions with social connectedness : Implications for venture capital," Post-Print hal-04325756, HAL.
    • Handle: RePEc:hal:journl:hal-04325756
    Note: View the original document on HAL open archive server: https://hal.science/hal-04325756
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    Keywords

    Social connectedness; Venture capital; Capital allocation; Investment performance;
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