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Networks vs. market methods in high-tech venture fundraising: the impact of institutional environment

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  • Jing Zhang
  • Poh-Kam Wong

Abstract

This study examines how institutional environmental factors, including cultural norm, state regulatory system and venture capital market, influence the high-tech entrepreneur's choice for using network vs. market methods when approaching prospective investors at the early stage of their new venture creation. We collected comparative data through on-site interviews and questionnaire survey with 128 high-tech entrepreneurs in Singapore (a newly industrialised economy) and 250 in Beijing, China (an emerging economy). Our findings suggest that a culture emphasising the value of social obligation, the under-development of the legal/regulatory system and the immaturity of the venture capital market increased the proclivity of entrepreneurs to use network methods. Moreover, entrepreneurs who value networks higher in social obligation than in information transfer are more likely to choose personal ties instead of business ties. This study enhances our understanding of how high-tech entrepreneurs in emerging economies choose between networks and market methods in venture fundraising, and offers suggestions on how public policy makers in these economies can improve the institutional environment of their regions to promote high-tech new venture creation.

Suggested Citation

  • Jing Zhang & Poh-Kam Wong, 2008. "Networks vs. market methods in high-tech venture fundraising: the impact of institutional environment," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 20(5), pages 409-430, September.
  • Handle: RePEc:taf:entreg:v:20:y:2008:i:5:p:409-430
    DOI: 10.1080/08985620801886406
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    File URL: http://hdl.handle.net/10.1080/08985620801886406
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    References listed on IDEAS

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    1. Steven N. Kaplan & Per Strömberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 281-315.
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    Cited by:

    1. Nathalie Duran, 2016. "Le crowdlending, une opportunité de mission originale pour l'expert comptable ?," Post-Print hal-01651395, HAL.
    2. Ju, Wei & Zhou, Xiaohu & Wang, Shuaibin, 2019. "The impact of scholars’ guanxi networks on entrepreneurial performance—The mediating effect of resource acquisition," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 9-17.
    3. Nathalie Duran, 2016. "Le crowdlending : une opportunité de mission originale pour l'expert-comptable ?," Post-Print hal-01900572, HAL.
    4. Tate, Graham & Mbzibain, Aurelian, 2011. "The future contribution of bioenergy enterprises to rural business viability in the United Kingdom," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 1(2), pages 1-15.

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