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The Role of Venture Capital Investment in Startups’ Sustainable Growth and Performance: Focusing on Absorptive Capacity and Venture Capitalists’ Reputation

Author

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  • Jihye Jeong

    (Daedeok Venture Partners LLC, Daejeon 34126, Korea)

  • Juhee Kim

    (Institute for Business Research and Education, Korea University, Seoul 02841, Korea)

  • Hanei Son

    (HEC Paris, 78350 Jouy-en-Josas, France)

  • Dae-il Nam

    (Management Department, Korea University Business School, Seoul 02841, Korea)

Abstract

This study provides evidence on how venture capital (VC) investment affects startup firms’ sustainable growth and performance. Despite the rich and abundant research on the relationship between VC investment and startup performance, there is no clear evidence about the contribution of VC investment on the performance and market value of invested firms. In order to accurately measure the impact of VC investment, this study explored how VC investment at each stage of growth affects a startup’s sustainable growth and performance. Based on signaling theory and information asymmetry, this study proposed a positive link between initial-stage VC investment and a startup’s growth and performance. Using a sample of 363 firms listed from 2000 to 2007, this study demonstrated that startups are sustained and perform better as they receive their VC investment at the initial stage. The level of potential absorptive capacity positively moderated this association, unlike realized absorptive capacity, which did not show significant moderating effects.

Suggested Citation

  • Jihye Jeong & Juhee Kim & Hanei Son & Dae-il Nam, 2020. "The Role of Venture Capital Investment in Startups’ Sustainable Growth and Performance: Focusing on Absorptive Capacity and Venture Capitalists’ Reputation," Sustainability, MDPI, vol. 12(8), pages 1-13, April.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:8:p:3447-:d:349362
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