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Management literature on how interorganizational relationships influence firm performance has emphasized the importance of connections, positions, and cliques. We advance this literature by examining how network communities (membership in cohesive network structures) shape the performance of venture capital (VC) firms. We propose that community insiders affiliated with at least one network community will outperform outsiders. We also explicate the conditions under which the advantages of network community affiliations are likely to be muted. Specifically, we argue for the potential diseconomies of network community affiliations and the possibility of a substitutive relationship between network communities and institutional development. Leveraging recent advances in community-detection technology and longitudinal data on VC firms in China, we find support for our theoretical arguments. Analysis of mechanisms underlying our theoretical arguments reveals that the value of community affiliations comes from indirect connections within network communities. By integrating social network and institutional perspectives, this study highlights not only the promises but also the limits of relying on network community affiliations. [ABSTRACT FROM AUTHOR]

We argue that syndicates associate venture capitalists (VCs) with uneven skill levels in order to lower their expected gains from threatening to stop financing: Non-continued participation would send a milder negative signal to alternative financiers. This can explain the empirical observations that i) early-round syndicates regularly associate VCs with different levels of experience and ii) follow-on syndicates often involve none of the early-round VCs. Consistent with the theory, we find empirically that the heterogeneity of VC experience levels in a syndicate is i) negatively related to the extent to which the founders of the VC-backed firm are professionally well connected and ii) positively related to the likelihood of syndicate switching in a later round. [ABSTRACT FROM AUTHOR]

We exploit the staggered introduction of liability waivers when investors hold stakes in conflicting business opportunities as a shock to venture capital (VC) investment and director networks. After the law changes, we find increases in within-industry VC investment and common directors serving on startup boards. Despite the potential for rent extraction, same-industry startups inside VC portfolios benefit by raising more capital, failing less, and exiting more successfully. VC directors serving on other startup boards are the primary mechanism associated with positive outcomes, consistent with common VC investment facilitating informational exchanges in VC portfolios. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

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Existing studies have explored the impact of venture capital shareholding on the GEM-listed companies before and after listing from multiple perspectives. However, there has been limited research on the influence of venture capital shareholding on these companies' mergers and acquisitions(M&A) activities and performance. Additionally, two conflicting research findings have been presented in limited relevant studies. In order to clarify the mechanism by which venture capital shareholding affects M&A activities and performance of GEM-listed companies and verify existing research conclusions, this paper takes 468 M&A events completed by the acquirer of China's GEM-listed companies between 2014 and 2016 as samples to explore venture capital shareholding's effects on the M&A performance of GEM-listed enterprises. The empirical findings demonstrate that GEM-listed enterprises with venture capital shareholding perform significantly better in terms of short-term and long-term M&A performance than those without; with the increase in venture capital shareholding ratio, the short-term M&A performance of GEM-listed enterprises has remarkably improved, but the long-term M&A performance does not show obvious correlation; joint investment of venture capital can significantly improve the short-term M&A performance of GEM-listed enterprises, but it has no substantial influence on long-term M&A performance. Based on further analysis of the empirical study, it is concluded that the common one-share ownership structure of GEM-listed enterprises is not conducive to the play of the monitoring function of venture capital, and the insufficient incentives and free-riding thinking also weaken the motivation and input of some venture capital shareholders to provide value-added services. This study systematically elucidates the mechanism and impact of venture capital shareholding on the M&A performance of GEM-listed companies, addressing the shortcomings in existing research. It is conducive for GEM-listed companies to gain a rational understanding and effectively leverage the active role of venture capital shareholders in M&A activities. [ABSTRACT FROM AUTHOR]

This article re-evaluates a failed large irrigation enterprise and agricultural plantation in the Khanate of Khiva, an Imperial Russian protectorate in contemporary Uzbekistan, during the 1910s. Co-initiated by Russian entrepreneurs and the Khivan government, this project has been considered one of several lucrative, speculative ventures by Russian capitalists exploiting imperial privileges. This article demonstrates that the entrepreneurs involved in the dacha Lawzan enterprise possessed adequate capital and technology for this large-scale project. However, the project was hampered by legal restrictions put in place by the imperial government and by lingering conflict with nomads in the Khanate and ultimately failed. The case of dacha Lawzan exemplifies government–entrepreneur tension in the colonial territories of Imperial Russia, which impeded the economic development projects initiated by local governments to attract private capital to irrigation and cotton cultivation. [ABSTRACT FROM AUTHOR]

This study conducts a systematic literature review of San Diego’s innovation ecosystem to analyse its evolution, dynamics, the most influential (key) stakeholders, and success factors. 1,405 documents from Scopus and 809 documents from Web of Science (WoS) were retrieved and analysed to obtain a final sample of twenty articles. The ecosystem’s key organisational stakeholders were identified as UC San Diego, research institutes, venture capitalists, pioneer and leading companies and intermediary organisations. Regarding success factors, key political factors include research funding, other public funding and policies that foster, for example, the actors’ geographical proximity. Key economic factors include start-up support systems, company acquisitions and initial public offerings (IPOs). Several vital social factors, such as collaboration, social networks and risk-taking culture, were also identified. Finally, the key technological success factors include technology transfer, specific focus areas and critical mass in research and development. This systematic review, complemented by expert interviews, provides a comprehensive view and validation of the stakeholders and factors that have contributed to the emergence, evolution and dynamics of the innovation ecosystem. The study also exemplifies an originally nonleading city’s path to success, which can provide valuable innovation policy and planning insights for other nonleading regions. [ABSTRACT FROM AUTHOR]

This paper empirically examines the representation of female venture capitalists (VCs) on boards and how they exert substantial influence on firm innovation performance in China. We first identify a positive association between female VCs' board participation and firm innovation, implying that Chinese female VCs contribute to growing resource commitments and greater success in innovation through quality board services in portfolio firms. We then show that firms with female VC board directors exhibit a lower adverse effect of managerial myopia, capital market pressure, and product market competition on innovation activities. These results are robust to the use of instrumental variable (IV) estimations, subsamples, and alternative variable definitions. [ABSTRACT FROM AUTHOR]

This paper investigated how hiring one of the Big 4 auditing firms helps initial public offering (IPO) owners attract venture capitalists' (VCs) backing when going public to address the gap in auditing and venture capital literature. For this, the paper examined a large dataset from 1995 to 2019 consisting of 33,536 IPO firms from 22 countries with diverse socioeconomic, political, and cultural contexts. The study found that hiring Big 4 auditors increases IPO owners' chances of recruiting VCs by up to 50%. The analysis also supports prior findings, which state that IPO owners strategically choose Big 4 audit firms to lower agency costs and send quality signals to improve openness and disclosure as well as boost VCs' confidence in the IPO market. This research offers multiple benefits to academics, policymakers, investors, and issuers. [ABSTRACT FROM AUTHOR]

Entrepreneurial teams represent a critical evaluation criterion for venture capitalists (VCs) in the context of making investment decisions. Despite the importance of teams in VCs' new venture evaluation, we lack an understanding of the ways in which VCs evaluate entrepreneurial teams. Using multiple case studies of 15 VCs, we identify five distinct approaches to evaluation: intuitive approach, extended intuitive approach, systematic intuitive approach, psychological rational approach, and scientific rational approach. These approaches vary in terms of the extent to which the VCs performing the evaluation develop structured procedures, incorporate objective data analysis, and spend time on data collection and analysis. Our findings reveal VCs' heterogeneous approaches to evaluation, which feature different combinations of subjective and objective evaluations. [ABSTRACT FROM AUTHOR]

Using a sample of 5,383 investment events of venture capital firms (VCs) investing in Chinese companies between 1997 and 2017, we investigate how levels of human capital of chief executive officers (CEOs) of portfolio companies affect tendencies of foreign and domestic VCs to replace CEOs. We find that domestic and foreign VCs are similar in that they are both less likely to replace CEOs of their portfolio companies if CEOs have higher levels of human capital. Furthermore, we find that domestic and foreign VCs exhibit significant differences in CEO replacement when not considering CEO human capital or when CEOs have lower levels of human capital. Results are consistent with our hypotheses that foreign VCs rely on CEO human capital as a stronger quality signal than domestic VCs, because they have more difficulty monitoring CEOs' post-investment performance. On the contrary, the geographical and cultural proximity of domestic VCs enables them to obtain information other than CEO human capital, such as CEOs' social skills, potential, entrepreneurial passion, and charisma, to make replacement decisions. The study advances our understanding of the behavioral differences between domestic and foreign VCs in the post-investment management process. [ABSTRACT FROM AUTHOR]

Based on 259 articles published in the entrepreneurship, management, and finance literatures during 1990-2022, we provide an integrative review and synthesis of governance in new ventures. We structure our review around the formal contract between the new venture and its investors, and discuss the governance approaches of various pre-initial public offering investors across the three stages of the investment cycle: precontractual, contract design, and post-contractual. Pre-contractual governance and contract formation are explained using a signaling theory lens. To capture the intricacies of post-contractual governance, particularly for late-stage investors such as venture capitalists and private equity firms that have conflicting interests, multiple identities, and overlapping governance roles, we relax the core tenets of agency theory to direct academic inquiry toward a more sophisticated framework—multiple agency theory—that better reflects the complexities of post-contractual governance. Given the limitations of formal contracting in resolving the ambiguities of start-up governance, we integrate our narrative by using a complementary social embeddedness theory lens that highlights the importance of informal governance embedded in personal and social ties in creating implicit obligations based on trust, reciprocity, and reputation. Finally, we discuss how governance breakdowns can cause start-ups to fail, especially in their later stages. [ABSTRACT FROM AUTHOR]

We explore the interplay between homophilic preferences, reciprocity, and societal values in the formation of venture capital investment syndicates in China. Both Chinese and U.S. syndicate lead firms generally prefer including their fellow compatriot firms over comparable non-compatriots in the investment syndicates that they assemble. When a Chinese firm initiates a collaborative first move by including a U.S. firm in an investment syndicate, however, the U.S. firm no longer prefers comparably familiar U.S. firms over the Chinese firm when it subsequently chooses among prospective syndicate partner firms to include in its investment syndicates. In such cases, familiarity triggers impartiality; the experiential trust that was garnered from the collaborative first-move engagement initiated by the Chinese firm diminishes the nationality-based homophilic preferences of the U.S. firm. We do not find similar dynamics when the tables are turned. When a U.S. firm initiates a collaborative first move by including a Chinese firm in an investment syndicate, the Chinese firm subsequently remains partial to fellow compatriot firms that are otherwise comparable to the U.S. firm. The homophilic preferences and identity-based trust between Chinese firms grounded in shared nationality are resilient to any goodwill created by U.S. firms when they initiate collaborative first moves. [ABSTRACT FROM AUTHOR]

While venture capital firms are increasingly relying on recommendation models in investment decisions, existing startup recommendation models fail to consider the uniqueness of venture capital context, including two-sided matching between investing and investee firms and a lack of information disclosure requirements on startups. Following the design science research paradigm and guided by the proximity principle from social psychology, we develop a novel framework called SocioLink by depicting and analyzing various relations in a knowledge graph via machine learning. Our experimental results show that SocioLink significantly outperforms state-of-the-art startup recommendation methods in both accuracy and quality. This improvement is driven by not only the inclusion of social relations but also the superiority of modelling relations via knowledge graph. We also develop a web-based prototype to demonstrate explainable artificial intelligence. This work contributes to the FinTech literature by adding an innovative design artifact—SocioLink—for decision support in the investment context. [ABSTRACT FROM AUTHOR]

The pandemic has brought extraordinary attention (and therefore funds) to the medical technology (medtech) sector. The urgent need for innovation in this industry is widely acknowledged; thus, venture capitalists (VCs) are playing a major role in supporting its renovation. The present research aims to identify how venture capitalists approach medtech companies, which are typically perceived as considerably risky. Specifically, the objective is to highlight the features of the control mechanisms employed by VCs when financing firms operating in the health care industry, with explicit focus on the staged structure of the investment. Previous studies have supported the hypothesis of shorter financing rounds with higher required equity stakes when a VC firm approaches a hazardous investment. To test the consistency of such evidence with the case of medtech firms, two sets of regressions on a unique dataset have been performed. The results reported show partial suitability of the expectations to the specific case. [ABSTRACT FROM AUTHOR]

Alliances are essential for high-tech startups that are seeking resources and preparing for future expansion. This study examines how the attributes of high-tech startups' early-stage inventions influence the likelihood of forming alliances. Specifically, we explore the impact of technological novelty and economic scope of inventions on alliance formation. Using a sample of 408 healthcare startups, we empirically demonstrate that technological novelty has a negative impact on alliance formation, whereas economic scope has a positive impact. We also find that the engagement of corporate venture capitalists can mitigate the negative impact of technological novelty on high-tech startups' alliance formation. [ABSTRACT FROM AUTHOR]

I study venture capital firms' (VCs) use of public market information and how attention to this information relates to private market investment outcomes. I link web traffic to public filings hosted on EDGAR to individual VCs. VCs analyze public information about industry peers before most deals. An increase in industry filing views relates positively to the probability of an exit through acquisition, suggesting that public information helps identify paths to acquisition. The effect is stronger when the VC has less access to private information, especially for low-reputation VCs. Policymakers should consider spillover effects on private markets when setting public disclosure requirements. [ABSTRACT FROM AUTHOR]

Does growing reliance on private military and security companies (PMSCs) lead to the re-configuration of the state as a security and defence actor in Europe? Building on the multiple-networks-approach in organisation theory (Padgett and Powell), the current paper develops an analytical approach for studying the rise of new organizational forms in interstitial spaces via mechanisms including extension and differentiation; fusion and hybridity; transposition and refunctionality; and multivocality. The empirical analysis focuses on the rules and practices of Vesper Group - a PMSC working closely with the Swedish government. Several findings are reported. First, a new organizational form seems to be emerging as a result of the ongoing multiple network dynamics – national defence entrepreneurial firm. This is a type of a firm different from mainstream PMSCs in that it is owned by venture capital companies from their home state and also in that it is closely associated with its respective state in terms of its personnel policies, expertise and operational goals and scope. Second, the case of Sweden's Vesper Group and its cooperation with the Swedish government indicates that some EU member states may also be in the process of structural and institutional mutation as providers of defence and crisis management capabilities. [ABSTRACT FROM AUTHOR]

In the context of the Chinese market, foreign cross-border venture capitalists have devised specific strategies to mitigate the challenges associated with the liabilities of foreignness, such as risks and information asymmetry. They have strategically leveraged social capital to not only decrease investment risk but also to influence their investment preferences and behaviors. To investigate the influence of different types of social capital on the investment decisions of cross-border venture capitalists, hypotheses are proposed and tested using regression analysis. Our research reveals several key findings in this regard. Firstly, cross-border venture capitalists with a robust structural social capital network exhibit a greater propensity to invest in early-stage companies. This suggests that well-established connections and partnerships within the Chinese entrepreneurial ecosystem provide a level of comfort and confidence when investing in ventures at their infancy. Interestingly, relational and cognitive social capital, though undoubtedly valuable, do not significantly impact the decision to make early-stage investments. Furthermore, we have observed that venture capitalists with higher levels of structural and cognitive social capital are more inclined to form syndications. Collaborative partnerships and shared knowledge networks seem to be crucial factors that drive syndication decisions. Lastly, venture capitalists endowed with substantial structural and relational social capital tend to allocate larger investment amounts, signifying the influence of business or personal relationships and network connections on the scale of their investments. [ABSTRACT FROM AUTHOR]

Most entrepreneurs seek VC funding after the reward-based crowdfunding campaign succeeds, and venture capitalists (VCs) can contribute to the project in two aspects: investment and operational expertise. With a game-theoretical model, we find that entrepreneurs face twelve possible scenarios contingent on the mass market revenue and revenue share, including the six scenarios wherein neither side exerts effort to complete the project. To attract VC funding and ensure the project completion after a campaign success, entrepreneurs should set the funding goal above a certain threshold. Specifically, we identify three ranges of the revenue share and derive the lower bound for the funding goal in each range. However, we notice that entrepreneurs prefer a low funding goal to promise the campaign success and the optimal goal will be the lower bound in each range. Moreover, we show that the revenue share is decisive to the role of VCs in the project. If the entrepreneur's share exceeds a high threshold, the venture capitalist becomes a pure investor with no incentive to exert effort, similar to the role of banks; if the share is less than a low threshold, the entrepreneur won't follow up but transfers the project, and the VC investor will be a project owner; if the share stays medium, the VC investor acts as a partner and there may exist "free-riding". In the extension, we consider the revenue share an endogenous and analyse the role of VCs further. Interestingly, the VC investor prefers to own the project and occupy all revenue in mass market, while the entrepreneur treats the inefficient venture capitalist as a pure investor and the efficient one as a partner. In addition, when cooperating with efficient VCs, the entrepreneur is more likely to enlarge her share as the mass market revenue increases. [ABSTRACT FROM AUTHOR]

We examine the relation between venture capital (VC) investments, M&A activity, and merger competition laws in 45 countries around the world. We find evidence of a strong positive association between VC investments and lagged M&A activity, consistent with an active M&A market providing viable exit opportunities for VC companies and therefore incentives for venture capitalists to invest. We also explore the effects of country-level merger competition laws and pro-takeover legislation passed internationally on VC activity. We find significant reductions in VC activity in countries with stricter competition laws and find that VC activity intensifies after the enactment of country-level takeover-friendly legislation. (JEL G15, G24, D43, K21, L26) [ABSTRACT FROM AUTHOR]

This study investigates whether the retention of founders has a greater impact on deal prices and acquirer benefits compared with the retention of family successors or CEOs when private firms pursue a merger exit strategy. The results demonstrate that higher prices and returns can be achieved when founders remain postmerger. These findings hold up even when considering the acquirer's long‐term operating and market performance, indicating the robustness of the results. Additionally, the study reveals that the effect of founder retention is larger than that of CEO retention, and the effect of founder‐CEO retention is the largest. Furthermore, the study examines multistage investments and exits, revealing that venture capitalists can trade off the benefits of founder maturity and firm growth. This implies that founder premiums vary with the enterprise life cycle. Finally, the study investigates the mechanism behind these results, finding that venture capital backing, high‐tech industry, earnouts and stock‐for‐stock deals as moderators can significantly enhance the founder‐retention effect on acquirer benefits. This study proposes that the specific human capital and entrepreneurial spirit of founders, transcending ownership, emerge as driving forces behind this effect. Founder heterogeneity also suggests that acquirers can benefit more from founder retention when founders are innovative talents or serial entrepreneurs. [ABSTRACT FROM AUTHOR]

The last 25 years have witnessed the emergence of the International Branch Campus (IBC) as a means of providing Transnational Higher Education (TNE). The growth in the number of IBCs has not been without examples of failure and in some cases controversy, necessitating informed decision-making on the part of university leaders contemplating such a venture. Based on a systematic review of literature concerning the motivations for establishing IBCs; the drivers of sustainability and longevity; and case studies of successful and unsuccessful ventures by UK universities, this paper identifies key characteristics of successful IBCs. It proposes a framework – combining strategic, leadership, academic, financial and operational factors – for use by decision-makers in determining whether to establish and how to manage an IBC. [ABSTRACT FROM AUTHOR]

This study investigates the dynamics within entrepreneurial ecosystems, focusing on the influence of venture capital (VC) financing clusters and industry clusters on startup success. VC financing clusters, geographic hubs with intense VC funding activities, and industry clusters, regions with concentrated sector-specific firms, are integral components. Expanding existing research that links proximity to these clusters with successful exits through mergers and acquisitions (M&A), our study includes initial public offerings (IPOs) as a vital exit strategy. Results show that affiliations with venture capitalists in prominent VC financing clusters enhance M&A and IPO success for startups. Intriguingly, startups in industry strongholds exhibit a greater likelihood of M&A success, but, this effect is not seen for IPO exits. Additionally, the absence of startup co-location with venture capitalists in VC financing hubs does not impact IPO exits but hinders M&A success. These nuanced insights highlight the complex relationships within entrepreneurial ecosystems and underscore the need for tailored perspectives considering diverse exit pathways. [ABSTRACT FROM AUTHOR]

In her quest to elevate Manzana Verde to the esteemed status of a Unicorn, Larissa Arias drew inspiration from triumphant Latin American precedents, notably Rappi, valued at a staggering 3.5 billion. With the unwavering support of a venture capital firm committed to both social impact and scalability, Larissa ardently pursued this ambitious goal. The Teaching Note to this Case Study is available on request via e-mail to ifamr@ifama.org. [ABSTRACT FROM AUTHOR]

This article explores the potential for India to enhance its economy through space exploration and applications. It highlights the growth of the global space economy, which is projected to reach $1.1 trillion by 2040. The article emphasizes the sustainable approach taken by various space stakeholders and the positive impact of private and entrepreneurial spaceflight activities. Currently contributing 2% to the global space economy, India has the potential to increase its contribution to $44 billion by 2033. The adoption of the New Space Policy in 2023 has encouraged greater involvement of non-governmental entities in India's space industry. While government funding remains dominant, there is a growing interest and investment from the private sector. To further accelerate progress, the article suggests utilizing cost-effective technological innovations, transferable space technologies, and partnerships with non-profit organizations. [Extracted from the article]

Analyzing hand-collected credit agreements for a sample of middle-market firms over 2010–2015, we find that one-third of all loans are directly extended by nonbank financial intermediaries. Two-thirds of such nonbank lending can be attributed to bank regulations that constrain banks' ability to lend to unprofitable and highly levered borrowers. Firms with negative EBITDA and debt/EBITDA greater than six are 32 |$\%$| and 15 |$\%$| more likely to borrow from nonbanks. These firms pay significantly higher interest rates, especially following the 2013 leveraged loan guidance revisions. Nonbank borrowers also receive different nonprice terms compared to firms borrowing from banks. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]