Beggars or choosers? Lead venture capitalists and the impact of reputation on syndicate partner selection in international settings

Plagmann, Carolin; Lutz, Eva

doi:10.1016/j.jbankfin.2019.01.007

Cited by 28 publications

(9 citation statements)

References 56 publications

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“…( [34,105] or portfolio companies [95,106,107]. is empirical exercise performed further analysis on the importance of VeCS leading VC firms in their portfolio, finding that, in FVC-led syndication backed firms, IC has stronger positive impact on firm performance than in GVC-led syndication or DPVC-led syndication backed firms, consistent with [34], also supporting [108], where venture capitalists seem to prefer crossborder partners over domestic ones. Moreover, this study found that the mentioned effect is specially evidenced in the impact of innovation capital on firm performance; the impact of human capital and structural capital on PFP showed no significant difference between firms backed by FVC-led, DPVCled syndication, or GVC-led syndication.…”

Section: Discussionsupporting

confidence: 64%

Intellectual Capital and Firm Performance in the Context of Venture‐Capital Syndication Background in China

Tian

Buitrago

et al. 2021

Complexity

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This paper is intended to investigate the role of Venture-Capital Syndication (VCS) background in the relationship between intellectual capital (IC) and portfolio firm performance (PFP); specifically, this article examines the moderating effect of VCS’s leading firm background and member heterogeneity on the effect of IC on PFP. This study used a modified VAIC model to measure IC to compose a 4-component variable including human capital, structural capital, relational capital, and innovation capital. The data were collected from VCS-backed and listed firms in China during 2014 to 2018 applying the pooled OLS model for hypotheses test, Generalized Method of Moments (GMMs) to reduce endogeneity and unobserved factor control, and also return on equity (ROE) instead of ROA for the robustness test. Empirical results showed that IC and its components can improve PFP for VCS-backed firms in China; in detail, IC showed greater impact on performance of firms invested by foreign lead investors than in private or government VCS, specially reflected in the impact of innovation capital on PFP. Furthermore, IC showed weaker impact on PFP of mixed VCS-backed firms compared to pure VCS-backed firms and showed diminished effect on higher VCS member heterogeneity mainly reflected in the impact of relational capital on firm performance. These findings propose a new way of combining IC and VC to improve firm performance and are beneficial to theoretical development of IC and VC as well as a perspective for VC firm managers to choose suitable partners prior to join a VCS.

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Section: Discussionsupporting

confidence: 64%

Intellectual Capital and Firm Performance in the Context of Venture‐Capital Syndication Background in China

Tian

Buitrago

et al. 2021

Complexity

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“…Prior strategy literature has conceptualized the homophily lens at both organizational and individual levels to understand the formation of VC syndicate ties. In particular, studies investigating VC investors' syndicate partner selection have focused on homophily attributes, which include organizational size (Rowley et al ., 2005), geographical location (Sorenson and Stuart, 2008), nationality (Plagmann and Lutz, 2019), ethnics, educational and career background (Gompers et al ., 2016; Zhang et al ., 2016), status measured by VC firms' order on Tombstone ads (Chung et al ., 2000; Podolny, 1994), prior investment and successful exit experience (Cheng and Tang, 2019; Huyghebaert and Priem, 2015) and centrality in the VC syndicate network (Huyghebaert and Priem, 2015; Shipilov et al ., 2011; Zhang et al ., 2017). These studies also exclusively adopted a single dimension when evaluating whether VC investors tend to form ties with similar others.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…It is critical for leaders to accurately estimate the amount of capital they can raise. Leaders' abilities of securing a larger pool of funding demonstrate their reputation in the industry, which has significant influence on their attractiveness to founders, syndicate formation and investment performance (Plagmann and Lutz, 2019). Strategically selecting syndicate leaders is also important for backers.…”

Section: Literature Reviewmentioning

confidence: 99%

Understanding investor co-investment in a syndicate on equity crowdfunding platforms

Liu

2023

IMDS

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PurposeConsidering the unique characteristics of equity crowdfunding platforms including the removal of stringent structural barriers (e.g. lack of co-location), high visibility and traceability of investor characteristics, large pool of available investors and simplified transaction process, the authors aim to examine how the two most prevalent mechanisms (i.e. homophily and repeated ties) unfold in this context by incorporating the contextual characteristics. The authors theorize an inverted U-shaped relationship between leader-backer similarity and the likelihood of co-investment in a syndicate on equity crowdfunding platforms. In addition, a leader–backer dyad is more likely to form new syndicates if the students have more prior co-investment ties.Design/methodology/approachThe empirical study is based on data from the AngelList syndicate platform and a linear probability model (LPM) with fixed effects is adopted to estimate the syndicate formation.FindingsThe authors find that the similarity between a leader and a backer has an inverted U-shaped relationship with the leader and backer's likelihood of co-investment in a syndicate, which is different from the dominant homophily-based tie formation in venture capital (VC) syndicates and other digital platform contexts. Although equity crowdfunding platforms encourage the possibility of exploring new partners, investors are more likely to co-invest with others who have stronger prior ties.Originality/valueThis research theoretically contributes to the scant literature of equity crowdfunding syndicates by contextualizing two most prevalent mechanisms (i.e. homophily and repeated ties) driving tie formation in VC syndicates and digital platforms.

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“…Factors influencing partner selection have long focused on organizational theorists studying partnerships, including strategic alliances (Mitsuhashi and Greve, 2009) and VC syndication (Sorenson and Stuart, 2008;Plagmann and Lutz, 2019). Granovetter (1973) described the phenomenon of two strangers creating strong and weak ties through some common medium as a closed triad.…”

Section: Cross-border Quadratic Relationship Closurementioning

confidence: 99%

How does venture capital cross-border syndication spur corporate innovation? Evidence from China

Hao

Li-hong²,

Dong³

2022

Front. Psychol.

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In recent years, venture capital (VC) cross-border syndication has shown an obvious growth trend. Based on the existing studies, this paper explores the impact of VC cross-border syndication on corporate innovation. We also examine the mediating roles of cross-border quadratic relationship closure (CBQRC) formed by the strategic cooperation relationship between the respective portfolio companies of domestic and foreign VCs. This paper conducted an empirical analysis to test our hypotheses using a sample of first-round investments in domestic firms by domestic VC firms from 2014 to 2016. Results show that the more investment events of VC cross-border syndication or the more partners of VC cross-border syndication, the more likely it is to have a significant positive impact on the innovation of domestic portfolio companies. CBQRC plays a mediating role between VC cross-border syndication on corporate innovation. Results remain robust after removing endogeneity using the instrumental variables approach and removing sample selection bias using Heckman two-stage regression. Results deepen the understanding of the relationship between VC cross-border syndication and corporate innovation and provide essential guidance to domestic VC firms promoting corporate innovation in open partnerships.

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Beggars or choosers? Lead venture capitalists and the impact of reputation on syndicate partner selection in international settings

Cited by 28 publications

References 56 publications

Intellectual Capital and Firm Performance in the Context of Venture‐Capital Syndication Background in China

Intellectual Capital and Firm Performance in the Context of Venture‐Capital Syndication Background in China

Understanding investor co-investment in a syndicate on equity crowdfunding platforms

How does venture capital cross-border syndication spur corporate innovation? Evidence from China

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