The Impact of the Compensation Mechanism of GVCGFs on VC Firms' Network Position

Abstract

Abstract:

Networking has become an increasing trend in China's venture capital (VC) market, and promoting the network position may be an important way for venture capital firms to achieve competitive advantage. Based on the theoretical perspective of incentives, the im-pact of compensation mechanism of China's Government Venture Capital Guiding Funds(GVCGFs) on VC firms' network position is in-vestigated in the paper. These VC firms are funded by the government and act as limited partners to commit in VC funds. By constructing a large matching sample from the PEdata database and using a difference-in-differences model, it is found that the equity participation of GVCGFs may promote VC firms' network positions if they provide the private capital with revenue compensation, fixed-revenue compen-sation, or revenue compensation plus fixed-revenue compensation, but may not if there is loss compensation, loss compensation plus fixed-revenue compensation, or loss compensation plus revenue compensation plus fixed-revenue compensation. It is also found that the network position promoting effects are more significant for GVCGFs participating in non-state-backed VC firms than for those participating in state-backed ones. These results support the incentive hypothesis, expand our understanding of the government VCs and VC network, and support some recommendations for the GVCGFs' authorities to choose the compensation mechanism as well as a feasible strategy for VC firms to enhance their network position.

Key words: Government Venture Capital Guiding Fund, equity participation, compensation mechanism, venture capital firm, network po-sition

Yang Minli, Ding Wenhu, Guo Lihong, Marcus W. Feldman. The Impact of the Compensation Mechanism of GVCGFs on VC Firms' Network Position[J]. , 2020, 32(1): 107-118.

References

[1] 冯冰,党兴华,杨敏利.网络地位对风险投资机构跨区域筹资的影响研究[J].预测, 2015,34(2):48-53
[2] Rider C. I. Constraints on the Control Benefits of Brokerage:A Study of Placement Agents in U.S. Venture Capital Fundraising[J]. Administrative Science Quarterly, 2009,54(4):575-601
[3] Sorenson O., Stuart T. E. Syndication Networks and the Spatial Distribution of Venture Capital Investments[J]. American Journal of Sociology, 2001,106(6):1546-1588
[4] Cumming D. J., Dai N. Local Bias in Venture Capital Investments[J]. Journal of Empirical Finance, 2010,17(3):362-380
[5] Guler I., Guillén M. F. Home Country Networks and Foreign Expansion:Evidence from the Venture Capital Industry[J]. Academy of Management Journal, 2010,53(2):390-410
[6] Zhelyazkov P. I., Gulati R. After the Break-up:The Relational and Reputational Consequences of Withdrawals from Venture Cap-ital Syndicates[J]. Academy of Management Journal, 2016,59(1):277-301
[7] Zhang J., Pezeshkan A. Host Country Network, Industry Experiences, and International Alliance Formation:Experience from the Venture Capital Industry[J]. Journal of World Business, 2016,51(2):264-277
[8] 杨敏利,丁文虎,郭立宏,等.双重网络嵌入对联合投资形成的影响——基于网络信号视角[J].管理评论, 2018,30(2):61-70
[9] Hochberg Y. V., Ljungqvist A., Lu Y. Whom You Know Matters?Venture Capital Networks and Investment Performance[J]. The Journal of Finance, 2007,62(1):251-301
[10] Abell P., Nisar T. M. Performance Effects of Venture Capital Firm Networks[J]. Management Decision, 2007,45(5):923-936
[11] 党兴华,董建卫,吴红超.风险投资机构的网络位置与成功退出:来自中国风险投资业的经验证据[J].南开管理评论, 2011,14(2):82-91
[12] 罗吉,党兴华,王育晓.网络位置、网络能力与风险投资机构投资绩效:一个交互效应模型[J].管理评论, 2016,28(9):83-97
[13] Bellavitis C., Filatotchev I., Souitaris V. The Impact of Investment Networks on Venture Capital Firm Performance:A Contingen-cy Framework[J]. British Journal of Management, 2017,28(1):102-119
[14] Nahata R. Venture Capital Reputation and Investment Performance[J]. Journal of Financial Economics, 2008,90(2):127-151
[15] Ma D., Rhee M., Yang D. Power Source Mismatch and the Effectiveness of Interorganizational Relations:The Case of Venture Capital Syndication[J]. Academy of Management Journal, 2013,56(3):711-734
[16] 杨敏利,党兴华.风险投资机构的网络位置对IPO期限的影响[J].中国管理科学, 2014,22(7):140-148
[17] Bothner M. S., Kim Y. K., Lee W. Primary Status, Complementary Status, and Organizational Survival in the U.S. Venture Cap-ital Industry[J]. Social Science Research, 2015,52:588-601
[18] Ozmel U., Robinson D. T., Stuart T. E. Strategic Alliances, Venture Capital, and Exit Decisions in Early Stage High-tech Firms[J]. Journal of Financial Economics, 2013,107(3):655-670
[19] Ozmel U., Reuer J., Gulati R. Signals across Multiple Networks:How Venture Capital and Alliance Networks Affect Interorgani-zational Collaboration[J]. Academy of Management Journal, 2013,56(3):852-866
[20] 王兰芳,胡悦.创业投资促进了创新绩效吗?——基于中国企业面板数据的实证检验[J].金融研究, 2017,(1):177-190
[21] 蔡宁,何星.社会网络能够促进风险投资的"增值"作用吗?——基于风险投资网络与上市公司投资效率的研究[J].金融研究, 2015,(12):178-193
[22] Fund B. R., Pollock T. G., Baker T., et al. Who's the New Kid?The Process of Developing Centrality in Venture Capitalist Deal Networks[J]. Advances in Strategic Management, 2008,25:563-593
[23] Pollock T. G., Lee P. M., Jin K., et al.(Un) Tangled:Exploring the Asymmetric Coevolution of New Venture Capital Firms' Reputation and Status[J]. Administrative Science Quarterly, 2015,60(3):482-517
[24] Milanov H., Shepherd D. A. The Importance of the First Relationship:The Ongoing Influence of Initial Network on Future Status[J]. Strategic Management Journal, 2013,34(6):727-750
[25] Houston J. F., Jiang L., Lin C., et al. Political Connections and the Cost of Bank Loans[J]. Journal of Accounting Research, 2014,52(1):193-243
[26] 党兴华,施国平,仵永恒.政治关联与风险资本筹集[J].预测, 2015,34(6):45-50
[27] Jääskeläinen M., Maula M., Murray G. Profit Distribution and Compensation Structures in Publicly and Privately Funded Hybrid Venture Capital Funds[J]. Research Policy, 2007,36(7):913-929
[28] 熊维勤.引导基金模式下的政府补偿及其激励效应[J].系统工程理论与实践, 2013,33(8):1926-1933
[29] Brander J. A., Du Q., Hellmann T. F. The Effects of Government-Sponsored Venture Capital:International Evidence[J]. Review of Finance, 2015,19(2):571-618
[30] 施国平,党兴华,董建卫.引导基金能引导创投机构投向早期和高科技企业吗?——基于双重差分模型的实证评估[J].科学学研究, 2016,34(6):822-832
[31] 董建卫,郭立宏.参股对象选择对引导基金参股投资杠杆效应的影响研究[J].投资研究, 2016,35(5):60-75
[32] 杨敏利,党兴华.主风险投资机构声誉、投资阶段与联合投资辛迪加构成[J].预测, 2012,31(6):21-27
[33] 董建卫,郭立宏.创业投资引导基金的补偿机制对引导效应的影响研究[J].中国科技论坛, 2016,(4):5-12
[34] 吴超鹏,吴世农,程静雅,等.风险投资对上市公司投融资行为影响的实证研究[J].经济研究, 2012,47(1):105-119
[35] Ci Research. RVCF and EGF Interim Evaluation:Qualitative Research Paper[R]. Department of Business, Innovation&Skills, 2009
[36] Aulakh S., Thorpe L. BIS Equity Finance Programmes Qualitative Reviews of a) UKHTF and b) the Bridges Fund[R]. Depart-ment of Business, Innovation&Skills, 2011
[37] 孟卫东,王利明,熊维勤.创业投资引导基金中公共资本对私人资本的补偿机制[J].系统工程理论与实践, 2010,30(9):1572-1578
[38] Hallen B. L. The Causes and Consequences of the Initial Network Positions of New Organizations:From Whom do Entrepreneurs Receive Investments?[J]. Administrative Science Quarterly, 2008,53(4):685-718