Work

Geographical distance, investment strategies and performance of venture capital: evidence from Chinese enterprises

Year: 2024

Type: article

Abstract: A growing body of evidence suggests that geographical distance plays an important role for venture capital (VC) investment. This study explores whether and how the geographical distance between the lead VC firms (VCFs) and the invested entrepreneurial firms (IEFs) influences the investment strategies of VCFs and their performance. The results show: (1) The geographical distance has a significant positive effect on the performance of VC investments. (2) As distance increases, lead VCFs will tend to be conservative on investments by improving project screening criteria and adopting syndication strategies and multiple-rounds of staged financing, which can dramatically improve the successful exit from the invested projects. This study has useful theory and policy implications for VCFs, entrepreneurial firms and local governments.

Source: Spatial Economic Analysis

DOI: 10.1080/17421772.2024.2342336

Authors: Jiaoe Wang, Fengyuan Liu, Jianjun Li, Delin Du, Jiafan Wu

Institutions: Chinese Academy of Sciences, Institute of Geographic Sciences and Natural Resources Research, University of Chinese Academy of Sciences, East China University of Political Science and Law, East China University of Science and Technology

Language: English

Topic: Private Equity and Venture Capital

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Industry, innovation and infrastructure

Open Access status: green

Funder: National Natural Science Foundation of China