Abstract

The high-speed growth of emerging economies attracts the attention of global investors, but the uncertain institutional environment in emerging and transitional economies makes investors uneasy. Using China’s venture capital (VC) data, this article examines the performance consequences of differences in ownership between foreign and local investors, and network position established when VC firms (VCs) syndicate portfolio company investments. There is a phenomenon of separate institutional settings between China’s local VCs and foreign VCs in China, which makes ownership significantly affect investment performance. The VCs’ positions in the collaborative networks can play a mediating role; foreign VCs have better investment performance because of their more central-network position. Better-networked VCs can supplement or replace formal institutions in transitional economies.

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