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Article

Yonghong Jin, Meng Xu, Wei Wang and Yuqin Xi

The purpose of this paper is to discuss how venture capital institutions can use their syndicated investment network to help listed companies to achieve better performance…

Abstract

Purpose

The purpose of this paper is to discuss how venture capital institutions can use their syndicated investment network to help listed companies to achieve better performance in mergers and acquisitions (M&A) activities.

Design/methodology/approach

This paper builds a fixed effect unbalanced panel regression model to study the impact of venture capital network on the M&A performance of listed companies.

Findings

Evidence indicated that the stronger the information resource acquisition ability of venture capital institutions in the network, the better the listed company's M&A performance supported; the stronger the information resource control ability of venture capital institutions in the network, the better the listed company's M&A performance supported; the higher the participation of venture capital institutions, the more significant the positive impact of information resource acquisition and information resource control abilities on M&A performance in the network.

Research limitations/implications

The data in this paper are from China's Growth Enterprise Market (GEM), other markets may be considered in the future research studies.

Practical implications

The research conclusions of this paper affirm the positive role played by venture capital institutions through syndicated investment in eliminating information asymmetry in M&A of invested companies. The information resource acquisition and control abilities and participation degree of the venture capital network have positively promoted the M&A performance of the invested enterprises.

Originality/value

The conclusions of this paper not only provide useful supplements to existing research literature on venture capital network functions and corporate M&A but also have certain guiding value for venture capital institutions and start-ups to better use venture capital practices to improve their capabilities and performance.

Details

China Finance Review International, vol. 11 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

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Article

David Leece, Tony Berry, Jia Miao and Robert Sweeting

The purpose of this paper is to identify the key characteristics of the post‐investment relationship between the venture capital firm and its investee companies.

Abstract

Purpose

The purpose of this paper is to identify the key characteristics of the post‐investment relationship between the venture capital firm and its investee companies.

Design/methodology/approach

The research is a case study of a major UK venture capital firm using qualitative research to determine the key characteristics of the post‐investment relationship. The study is based on interviews with parties on both sides of the relationship.

Findings

While the results reflect the findings of the entrepreneurship and venture capital literature they also point to the importance of network growth and development for organizational learning in the venture capital industry, professionalization of investee firms and as a context in which the selection of the entrepreneur and the post investment relationship are set.

Research limitations/implications

The research has the limitation of most case studies that the results cannot readily be generalized, in this case to the wider population of venture capital firms. Confidentiality issues also limited the extent to which a longitudinal study could be conducted.

Practical implications

A better understanding of the post‐investment relationship can inform entrepreneurs in their pitch for funds and in their anticipation of the post investment relationship. This understanding can also assist venture capital firms in the management of this relationship.

Originality/value

The case study uses data from rare access to a venture capital firm. It also differs by interviewing both parties to the post‐investment relationship, that is venture capitalist and investee firm.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 18 no. 5
Type: Research Article
ISSN: 1355-2554

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Article

Yawei Fu and Sin Huei Ng

The purpose of this paper is twofold to examine the factors that contribute to local bias of venture capital in China and to explore the relationship between local bias…

Abstract

Purpose

The purpose of this paper is twofold to examine the factors that contribute to local bias of venture capital in China and to explore the relationship between local bias and performance of venture capital institutions.

Design/methodology/approach

Local bias was measured in line with the model developed by Cumming and Dai (2010). Regression techniques were performed for our long-term cross-sectional data to analyse the potential determinants of local bias. This is followed by the Probit model to test the relationship between local preference and successful exit.

Findings

The overall finding indicated that local bias in China increased over time. The stiff competition among venture capital institutions reduced local bias, but the enhanced innovation capabilities of a particular geographical area amplified local bias because of the knowledge spillover effect. Finally, the results suggested that venture capital institutions with less local bias enjoy a greater likelihood of making successful exits.

Research limitations/implications

This study used successful venture capital exit as a proxy for venture capital institution’s performance because of the unavailability of information such as internal rate of return. Future research should try to adopt other way of measuring venture capital institution’s performance.

Practical implications

This study sheds light on the various possible causes of local bias that the policymakers need to be aware of. Despite the rapid rise of China’s venture capital market in recent years, venture capital institutions have yet to make inroads into the local high-tech industry. This study implies to the policymakers that to reverse this trend, they should formulate policies that foster the long-term performance of venture capital institutions, mitigate the severity of local bias and raise the competitiveness of the Chinese venture capital market.

Originality/value

Because of data limitations, there is currently lack of prior empirical research on local bias of Chinese venture capital institutions based on large-scale data. This study intends to fill the gap.

Details

Journal of Asia Business Studies, vol. 15 no. 1
Type: Research Article
ISSN: 1558-7894

Keywords

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Article

Robert D. Hisrich, Saša Petković, Veland Ramadani and Léo-Paul Dana

The purpose of this paper is to focus on the possibilities and limitations of venture capital formation in Bosnia and Herzegovina and Macedonia where there has been a lack…

Abstract

Purpose

The purpose of this paper is to focus on the possibilities and limitations of venture capital formation in Bosnia and Herzegovina and Macedonia where there has been a lack of success and benefits of small- and medium-sized enterprises (SMEs) from this type of financing.

Design/methodology/approach

The paper provides a rationale for specific methodological choices and justifies its choice. Both quantitative and qualitative methods were employed. The methods section (research design) explains the entry criteria for the study population, specific imaging techniques and methods of data analysis.

Findings

Venture capital invest in companies in the beginning to achieve an above average return on investment. Unfortunately, there are no officially registered venture capital funds in Bosnia and Herzegovina. For the venture capital funds to operate, it is necessary to adopt regulations governing this area, to create a favorable tax system and introduce a cash basis for VAT calculation for SMEs. The majority of respondents in the research believe that in the establishment of venture capital funds would provide one of the greatest supports by the governments of these countries, analyzing the economic situation in these countries, it is apparent that there is an under-developed legal and tax system, which does not support SMEs. In order to attract foreign and domestic investors, and form venture capital funds, it is necessary to create a favorable business environment.

Originality/value

The paper contains novel information and insight into VC funds in two transition economies of Bosnia and Herzegovina and Macedonia.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 2
Type: Research Article
ISSN: 1462-6004

Keywords

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Article

Mark R. Mallon, Stephen E. Lanivich and Ryan L. Klinger

Sustainable Family Business Theory states that human, social, and financial capital are important for new family venture growth, yet there may be multiple combinations…

Abstract

Purpose

Sustainable Family Business Theory states that human, social, and financial capital are important for new family venture growth, yet there may be multiple combinations that could be beneficial. The purpose of this paper is to examine whether all three types of resources are always needed for growth.

Design/methodology/approach

Fuzzy-set Qualitative Comparative Analysis, a configurational method, is used to investigate which combinations of human, social, and financial capital consistently lead to new family venture growth.

Findings

Multiple distinct combinations of resources – usually containing some form of human capital along with either social or financial capital – were sufficient for new family ventures to grow.

Research limitations/implications

The findings contribute to a more accurate Sustainable Family Business Theory in terms of the resource bundles needed to achieve growth. Not all three primary resources are needed at founding for the venture to grow. Results suggest a need for renewed focus on human capital in family venture research, as well as further investigations of the resource configurations uncovered here and their effects on family firm outcomes.

Practical implications

Given the costs associated with acquiring resources, the findings can inform family entrepreneurs and other stakeholders purposed with assisting new family ventures regarding optimal avenues of achieving growth.

Originality/value

This study advances theory by demonstrating which combinations of primary resources lead to new family venture growth. The findings shed light on how human, social, and financial capital may substitute for each other, as well as how the value of each depends on the presence or absence of the others.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 24 no. 2
Type: Research Article
ISSN: 1355-2554

Keywords

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Article

Lisa Jane Callagher, Peter Smith and Saskia Ruscoe

Interest in venture capital markets continues to be of relevance to politicians and policy makers, recognizing the importance of government participation in venture capital

Abstract

Purpose

Interest in venture capital markets continues to be of relevance to politicians and policy makers, recognizing the importance of government participation in venture capital market development. Yet advice regarding developing venture capital markets appears increasingly disparate. The paper aims to discuss these issues.

Design/methodology/approach

The authors engage the assumptions that underpin three dominant policy approaches to the development of venture capital markets with regard to the role of governments in that process. The authors categorize existing empirical studies against three approaches and give examples of the different government policies associated with the various approaches.

Findings

Direct and indirect approaches recognize the importance of active stock markets but largely ignore the dynamic processes of markets, asserting that the provision of capital, institutional changes, and financial incentives ex ante will cause a positive market reaction, regardless of the market’s context. The recent timed approached is purported as being more comprehensive in its awareness of the need to adapt to countries’ contexts and the need for varying policies at the different stages of market emergence.

Research limitations/implications

Limited empirical research tests the voracity and limitations of the timed approach. The challenge in doing so is that evolutionary theories typically explain an event after it has occurred, thus its predictive power is often limited. Future research might investigate the efficacy of policy levers based on the timed approach.

Practical implications

The authors highlight the need for the development of venture capital markets, rather than a venture capital industry.

Originality/value

The authors extend the existing venture capital market development categories and evaluate each approach in terms of the efficacy of government’s roles in venture capital market development in light of the existing evidence of economic development and entrepreneurial activity.

Details

Journal of Entrepreneurship and Public Policy, vol. 4 no. 3
Type: Research Article
ISSN: 2045-2101

Keywords

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Article

David Lingelbach

How does venture capital (VC) emerge in emerging and developing economies? This paper aims to use case data from an early Russian VC fund to extend a previous model…

Abstract

Purpose

How does venture capital (VC) emerge in emerging and developing economies? This paper aims to use case data from an early Russian VC fund to extend a previous model exploring that question.

Design/methodology/approach

Case studies of VC emergence from South Africa, Botswana, and Russia are compared, from which a conceptual model is developed.

Findings

VC emerges in a process consisting of four stages: enabling, coproducing, diffusing, and replicating. The Russian case shows that these stages are linked in a circular process, i.e. replicating can lead to enabling. VC emergence can also begin at any stage. A higher degree of public‐private coproduction may outweigh the absence of a completed enabling stage, suggesting that strength in one stage can compensate for weakness in others.

Research limitations/implications

This paper invites scholars to reconsider VC emergence in a more nuanced manner that takes into account its complex, processual nature. The inclusion of Russian data also encourages researchers to examine more closely the subtle ways in which the private and public sectors may interact in emerging markets in pursuit of common goals. This study's findings have important linkages with other critical accounts of international business. The study addresses weaknesses in earlier literature by employing a multi‐disciplinary, cross‐context approach that utilizes data from a foreign VC investing in Russian small to medium‐sized enterprises.

Practical implications

VCs considering investment in Russia should examine how early entrants to the industry formed cooperative relationships with local governments. Policymakers should re‐examine the relative importance of national and local efforts to promote VC and other innovation‐related initiatives in emerging markets.

Originality/value

This study moves beyond current economics‐dominated understanding of VC, which focuses on antecedents (enabling conditions). It reports the central role of public‐private coproduction in VC emergence, the feedback between diffusion and coproduction in emergence, and, most importantly, the diminished importance of enabling conditions. This paper presents the first fund‐level study of Russian VC.

Details

Critical perspectives on international business, vol. 9 no. 1/2
Type: Research Article
ISSN: 1742-2043

Keywords

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Article

Darek Klonowski

The purpose of this paper is to focus on the investigation of the venture capital investment process in the emerging markets of Central and Eastern Europe (CEE), including…

Abstract

Purpose

The purpose of this paper is to focus on the investigation of the venture capital investment process in the emerging markets of Central and Eastern Europe (CEE), including Hungary, Poland, the Czech Republic, Slovakia, Romania, and Russia. The study aims to describe the mechanics by which venture capital firms operating in the CEE region process deals.

Design/methodology/approach

The paper is based on a two‐phase interview interaction process with venture capitalists operating in the CEE region. In the first semi‐structured (exploratory) phase of the study, 14 venture capitalists agreed to participate in one‐hour interview and aimed at discussing their venture capital process. In the second phase of the study (confirmatory), 24 venture capital firms commented on the actual fit of the proposed nine‐stage model into their past investments.

Findings

The study has two conclusions. Firstly, the study confirms the existence of a nine‐stage venture capital investment model, comprised of deal origination, initial screening, feedback from the investment committee and due diligence Phase I, feedback from the investment committee (due diligence Phase I), pre‐approval completions, formal approvals and due diligence Phase II, deal completion, monitoring, and exit. Secondly, the proposed model defines the venture capital process in terms of three channels of activity: document channel, information channel, and decision channel.

Originality/value

The study is important for at least four reasons. Firstly, the study focuses on the investigation of the entire venture capital process. Previous research in the area focuses on some specific facets of the venture capital process. Secondly, the paper investigates the connection between decision‐making, information gathering and written communication within a venture capital fund. Thirdly, the study focuses on the most recent period of development of the CEE industry. Many venture capital firms only recently crystallized their venture capital process. Lastly, the study proposes areas of further research for academics and makes suggestions for practitioners.

Details

International Journal of Emerging Markets, vol. 2 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

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Article

Jin Xue and Yiwen Fei

In the practice of venture capital investment, the venture capital will not only claim the share of the enterprise’s future output, but also a certain amount of fixed…

Abstract

Purpose

In the practice of venture capital investment, the venture capital will not only claim the share of the enterprise’s future output, but also a certain amount of fixed income. The purpose of this paper is to examine the optimal contract which blends the variable ownership income and the fixed income theoretically so as to provide a keen insight into the venture capital practice.

Design/methodology/approach

This paper establishes an extended principal-agent model and researches on the design of optimal contract dominated by venture capital with double-sided moral hazard and information screening.

Findings

By establishing theoretical models, the main findings are: first, high-quality enterprise tends to relinquish less ownership but give more fixed return to the venture capital as compensation in order to obtain the venture capital financing; second, low-quality enterprise is willing to relinquish more ownership but give less fixed return to the venture capital for financing; third, due to the existence of double-sided moral hazard, neither of the venture capital and the enterprise will exert their best effort.

Originality/value

This paper furthers the application of principal-agent model in the field of venture capital investment and researches on the optimal contract, considering double-sided moral hazard and adverse selection at the same time originally.

Details

China Finance Review International, vol. 6 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

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Article

Ikenna Uzuegbunam, Yin-Chi Liao, Luke Pittaway and G. Jason Jolley

The purpose of this paper is to examine the impact of human and intellectual capital on start-ups’ attainment of government venture capital (GVC). It is theorized that as…

Abstract

Purpose

The purpose of this paper is to examine the impact of human and intellectual capital on start-ups’ attainment of government venture capital (GVC). It is theorized that as a result of government predisposition toward enhancing knowledge spillover and certifying underinvested start-ups, different types of human and intellectual capital possessed by start-ups will distinctly affect GVC funding.

Design/methodology/approach

The Kauffman Firm Survey, a panel data set of 4,928 new US firms over a five-year period (2004-2008), serves as the data source. Ordinary least squares regression, coupled with generalized estimating equations to check for robustness, is used to determine the effect of human and intellectual capital on GVC funding.

Findings

Founders’ educational attainment has a greater impact than their occupational experience in GVC funding. While the number of patents owned by the start-up increases GVC funding, the number of trademarks and copyrights negatively influence GVC funding.

Originality/value

By distinguishing between different aspects of human and intellectual capital, this study provides a more nuanced understanding of the influence of new venture resources in the context of GVC.

Details

Journal of Entrepreneurship and Public Policy, vol. 6 no. 3
Type: Research Article
ISSN: 2045-2101

Keywords

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