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Foreign venture capital investing strategies in transition economies: The case of China

Author

Listed:
  • Jiani Wang

    (Capital University of Economics and Business)

  • Su Chen

    (Grand Genius Group)

  • William Scheela

    (Bemidji State University)

Abstract

What type of investment strategies are effective for foreign venture capital (VC) firms investing in transition economies? This is the research question we address in this paper by analyzing recent institutional developments and investment activities of foreign VC firms investing in China. We find that foreign VC firms identify China as lacking fully-developed institutions necessary to effectively support VC investing. We further find that foreign VCs have evolved unique proactive, hands-on investment strategies via a bumpy road of investing in China: initially dominating the Chinese VC industry, but since the great financial recession playing a still-significant but reduced and disadvantaged-role subservient to the rapidly increasing role of domestic VC firms. We developed a novel triangulation research methodology that allows us to provide significantly more depth in our analysis of how foreign VCs compete in transition economies. This research contributes to both the institutional theory and VC investing literatures. We suggest that foreign VCs can increase their competitive advantage by developing hands-on value-added investing strategies, when investing in transitioning markets.

Suggested Citation

  • Jiani Wang & Su Chen & William Scheela, 2023. "Foreign venture capital investing strategies in transition economies: The case of China," Asia Pacific Journal of Management, Springer, vol. 40(4), pages 1481-1524, December.
    • Handle: RePEc:kap:asiapa:v:40:y:2023:i:4:d:10.1007_s10490-022-09829-6
    DOI: 10.1007/s10490-022-09829-6
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