How venture capital firms choose syndication partners: the moderating effects of institutional uncertainty and investment preference

L Zheng, L Cao, J Ren, X Li, X Yin… - … and Organization Review, 2022 - cambridge.org
L Zheng, L Cao, J Ren, X Li, X Yin, J Chen
Management and Organization Review, 2022cambridge.org
This study investigates how venture capital firms (VCs) choose syndication partners.
Exponential random graph models of Chinese VC syndication networks from 2006 to 2013
show that the homophily mechanism does not always determine VCs' partner selection. In
selecting partners, VCs have to strike a balance between reducing uncertainty and
mobilizing heterogeneous resources. Therefore, decisions about partners depend on
institutional uncertainty and VCs' investment preferences. While VCs that focus on traditional …
This study investigates how venture capital firms (VCs) choose syndication partners. Exponential random graph models of Chinese VC syndication networks from 2006 to 2013 show that the homophily mechanism does not always determine VCs’ partner selection. In selecting partners, VCs have to strike a balance between reducing uncertainty and mobilizing heterogeneous resources. Therefore, decisions about partners depend on institutional uncertainty and VCs’ investment preferences. While VCs that focus on traditional business in an immature market are more likely to form homogeneous syndications, their peers that prefer to invest in innovative companies and that can rely on a stable market tend to syndicate with heterogeneous partners.
Cambridge University Press
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