The Impact of Dual Network Embeddedness on Venture Capital Syndication:Based on the Perspective of Network Signal

Abstract

Abstract:

While most existing studies analyze the impact of VCs' embeddedness in single network in isolation, this paper investigates the influence of venture capital firms'(VCs) embeddedness in both syndication network and limited partner(LPs) network on the forma-tion of co-investment based on signaling theory. Using the data of China's local VCs between 2003 and 2015, we find that:First, VCs' affiliations with LPs that occupy central positions in limited partner network offer benefits for the formation of future co-investment. Sec-ond, VCs which occupy central position in syndication network offer benefits for the formation of future co-investment. Third, the positive effect of VCs' network position in determining their formation of co-investment diminishes as LPs' network position increases. These re-sults suggest that signaling value generated by different types of network (syndication network and limited partner network) in reducing adverse selection can substitute each other during the process of co-investment formation.

Key words: limited partner, venture capital firm, network position, formation of co-investment, signaling, substitution effect

Yang Minli, Ding Wenhu, Guo Lihong, Marcus Feldman. The Impact of Dual Network Embeddedness on Venture Capital Syndication:Based on the Perspective of Network Signal[J]. , 2018, 30(2): 61-70,135.

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