IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v44y2023i5p2885-2906.html
   My bibliography  Save this article

Venture capital's portfolio network and portfolio firm's innovation performance: Evidence from China

Author

Listed:
  • Ting Cao
  • Wanli Li

Abstract

We examine how VC's portfolio network shapes portfolio firms' innovation. Through empirical research of the panel data of Chinese listed firms from 2009 to 2016, we find that competitive network ties exert negative impact on portfolio firms' innovation which complements existing research from the perspective of portfolio network. Second, considering the heterogeneity of innovation, we find that the progressive innovation is easier to be impaired by competitive network ties. Third, employing Chinese VC data can open a window to see the role of VC's portfolio network after the invested firm goes public and improve our understanding of VC's role in the latter half of investment cycle.

Suggested Citation

  • Ting Cao & Wanli Li, 2023. "Venture capital's portfolio network and portfolio firm's innovation performance: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(5), pages 2885-2906, July.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2885-2906
    DOI: 10.1002/mde.3853
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3853
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3853?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gary Dushnitsky & J. Myles Shaver, 2009. "Limitations to interorganizational knowledge acquisition: the paradox of corporate venture capital," Strategic Management Journal, Wiley Blackwell, vol. 30(10), pages 1045-1064, October.
    2. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    3. Philippe Aghion & John Van Reenen & Luigi Zingales, 2013. "Innovation and Institutional Ownership," American Economic Review, American Economic Association, vol. 103(1), pages 277-304, February.
    4. Douglas J. Cumming, 2006. "The Determinants of Venture Capital Portfolio Size: Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1083-1126, May.
    5. Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
    6. Kenneth J. Arrow, 1993. "Innovation in Large and Small Firms," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 2(2), pages 111-124, Spring.
    7. Das, Sanjiv R. & Jo, Hoje & Kim, Yongtae, 2011. "Polishing diamonds in the rough: The sources of syndicated venture performance," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 199-230, April.
    8. Haizhi Wang & Robert Wuebker & Shu Han & Michael Ensley, 2012. "Strategic alliances by venture capital backed firms: an empirical examination," Small Business Economics, Springer, vol. 38(2), pages 179-196, February.
    9. Vladimir Atanasov & Vladimir Ivanov & Kate Litvak, 2012. "Does Reputation Limit Opportunistic Behavior in the VC Industry? Evidence from Litigation against VCs," Journal of Finance, American Finance Association, vol. 67(6), pages 2215-2246, December.
    10. Dimo Dimov & Dirk De Clercq, 2006. "Venture Capital Investment Strategy and Portfolio Failure Rate: A Longitudinal Study," Entrepreneurship Theory and Practice, , vol. 30(2), pages 207-223, March.
    11. Masayuki Hirukawa & Masako Ueda, 2011. "Venture Capital And Innovation: Which Is First?," Pacific Economic Review, Wiley Blackwell, vol. 16(4), pages 421-465, October.
    12. Bhattacharya Sudipto & Chiesa Gabriella, 1995. "Proprietary Information, Financial Intermediation, and Research Incentives," Journal of Financial Intermediation, Elsevier, vol. 4(4), pages 328-357, October.
    13. Koch, Andrew & Panayides, Marios & Thomas, Shawn, 2021. "Common ownership and competition in product markets," Journal of Financial Economics, Elsevier, vol. 139(1), pages 109-137.
    14. Lockett, Andy & Wright, Mike, 2001. "The syndication of venture capital investments," Omega, Elsevier, vol. 29(5), pages 375-390, October.
    15. John Asker & Alexander Ljungqvist, 2010. "Competition and the Structure of Vertical Relationships in Capital Markets," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 599-647, June.
    16. Gifford, Sharon, 1997. "Limited attention and the role of the venture capitalist," Journal of Business Venturing, Elsevier, vol. 12(6), pages 459-482, November.
    17. Hung‐gay Fung & Qingfeng Liu & Jot Yau, 2007. "Financing Alternatives for Chinese Small and Medium Enterprises: The Case for a Small and Medium Enterprise Stock Market," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(1), pages 26-42, January.
    18. Peggy M. Lee, 2005. "A comparison of ownership structures and innovations of US and Japanese firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 39-50.
    19. Laura Lindsey, 2008. "Blurring Firm Boundaries: The Role of Venture Capital in Strategic Alliances," Journal of Finance, American Finance Association, vol. 63(3), pages 1137-1168, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Violetta Bacon-Gerasymenko & Jonathan D. Arthurs & Sam Y. Cho, 2020. "How and When Investment Horizons Determine Venture Capital Firms’ Attention Breadth to Portfolio Companies," Entrepreneurship Theory and Practice, , vol. 44(3), pages 475-503, May.
    2. Hoenen, Sebastian & Kolympiris, Christos & Schoenmakers, Wilfred & Kalaitzandonakes, Nicholas, 2014. "The diminishing signaling value of patents between early rounds of venture capital financing," Research Policy, Elsevier, vol. 43(6), pages 956-989.
    3. Kirsten Burkhardt, 2011. "Le rôle des sociétés de capital-risque dans la formation d’alliances stratégiques:Une synthèse de littérature - The Role of Venture Capitalists in the Formation of Strategic Alliances:An academic lite," Working Papers CREGO 1111102, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    4. Jackson, William E. & Bates, Timothy & Bradford, William D., 2012. "Does venture capitalist activism improve investment performance?," Journal of Business Venturing, Elsevier, vol. 27(3), pages 342-354.
    5. Albert Jolink & Eva Niesten, 2016. "The impact of venture capital on governance decisions in collaborations with start-ups," Small Business Economics, Springer, vol. 47(2), pages 331-344, August.
    6. Bertoni, Fabio & Tykvová, Tereza, 2015. "Does governmental venture capital spur invention and innovation? Evidence from young European biotech companies," Research Policy, Elsevier, vol. 44(4), pages 925-935.
    7. Dimo Dimov & Dirk De Clercq, 2006. "Venture Capital Investment Strategy and Portfolio Failure Rate: A Longitudinal Study," Entrepreneurship Theory and Practice, , vol. 30(2), pages 207-223, March.
    8. Dimitris Christopoulos & Stefan Koeppl & Monika Köppl-Turyna, 2022. "Syndication networks and company survival: evidence from European venture capital deals," Venture Capital, Taylor & Francis Journals, vol. 24(2), pages 105-135, April.
    9. Dutta, Supradeep & Folta, Timothy B., 2016. "A comparison of the effect of angels and venture capitalists on innovation and value creation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 39-54.
    10. Bertoni, Fabio & Tykvová, Tereza, 2012. "Which form of venture capital is most supportive of innovation?," ZEW Discussion Papers 12-018, ZEW - Leibniz Centre for European Economic Research.
    11. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 573-648, Elsevier.
    12. Zhiyi Qiu & Bingyi Liu & Ye Yang, 2023. "Like Performance, Perfect Match: Role of Past Performance in Venture Capital Syndication," SAGE Open, , vol. 13(4), pages 21582440231, December.
    13. Jeffrey J. Reuer & Ramakrishna Devarakonda, 2017. "Partner Selection in R&D Collaborations: Effects of Affiliations with Venture Capitalists," Organization Science, INFORMS, vol. 28(3), pages 574-595, June.
    14. Umit Ozmel & Isin Guler, 2015. "Small fish, big fish: The performance effects of the relative standing in partners' affiliate portfolios," Strategic Management Journal, Wiley Blackwell, vol. 36(13), pages 2039-2057, December.
    15. Kang Hyunsung D, 2018. "A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry," Entrepreneurship Research Journal, De Gruyter, vol. 8(3), pages 1-19, July.
    16. Bertoni, Fabio & Tykvová, Tereza, 2013. "Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies," FZID Discussion Papers 69-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    17. Rosenbusch, Nina & Brinckmann, Jan & Müller, Verena, 2013. "Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance," Journal of Business Venturing, Elsevier, vol. 28(3), pages 335-353.
    18. Aldatmaz, Serdar & Celikyurt, Ugur, 2023. "The effect of venture capital backing on innovation in newly public firms," Journal of Empirical Finance, Elsevier, vol. 74(C).
    19. Gill, Andrej & Heller, David & Michel, Nina A., 2024. "Enabling or accelerating? The timing of innovation and the different roles of venture capitalists," Research Policy, Elsevier, vol. 53(8).
    20. Stephen G. Dimmock & Jiekun Huang & Scott J. Weisbenner, 2022. "Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success," Management Science, INFORMS, vol. 68(9), pages 6950-6970, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2885-2906. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.