Venture capital risk in transitional economies : evidence from China

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2010-12

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[Honolulu] : [University of Hawaii at Manoa], [December 2010]

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Abstract

In China, guanxi is a particular kind of interpersonal relationship or connection that serves as a form of social currency that can secure resources and benefits in business contexts. In the venture capital market in China, some have suggested that venture capitalists (VCs) use guanxi as a mechanism for addressing institutional risks. This study examines how VCs respond to institutional risks in China using appropriate guanxi networks, which in turn have a direct and indirect influence on VC investment performance. I propose an integrative framework that both delineates the direct effects of guanxi networks on firm performance and indicates how they are moderated by environmental turbulence and mediated by response capabilities, interlocking directorates varying in density and multiplicity, and syndications such as affiliated projects and affiliated funds. A group of 222 venture capital firms in China were surveyed. This study identifies a significant link between guanxi and VC firm performance but also demonstrates that this link is reduced by environmental turbulence. The mediators identified here also have a significant influence on the relationship between guanxi and VC performance.

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Ph.D. University of Hawaii at Manoa 2010.
Includes bibliographical references.

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transitional economy, institutional risk, guanxi network, firm performance

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Theses for the degree of Doctor of Philosophy (University of Hawaii at Manoa). International Management.

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