Why Do Chinese Venture Capitals Invest Jointly? An Analysis of Complex Investment Network

Abstract

Why do Chinese venture capitals invest jointly? Instead of rational choice or resource-dependency approaches, this paper utilizes network theory to analyze the networking behaviors behind syndication in China. This research thus aims to analyze the VCs' consideration behind building relations, rather than the motivations for investing behaviors. In interviewing some informants in this field, we find that Chinese VCs tend to group old partners and new entrants together for conducting a series of joint investments. They highly emphasize the importance of long-term social relations and status in the industrial network. In other words, they are guanxi (the Chinese term, relationship) oriented, rather than driven by short-term self-interest in each transaction. This paper thus first hypothesizes that the relationship distance between two investors in syndication is not too far or too close. Secondly, the centered role in the VC network has accumulative advantages. Thirdly, Chinese VCs tends to accept new entra...