Navigating investment decisions with social connectedness: Implications for venture capital

Title: Navigating investment decisions with social connectedness: Implications for venture capital
Creator: Nguyen, Giang; Nguyen, My; Pham, Anh Viet; Pham, Man Duy
Relation: Journal of Banking and Finance Vol. 155, Issue October 2023, no. 106979
Publisher Link: http://dx.doi.org/10.1016/j.jbankfin.2023.106979
Publisher: Elsevier
Resource Type: journal article
Date: 2023
Description: This study examines how the geographical structure of social networks shapes venture capital (VC) investment decisions. We find that VC firms invest more in portfolio companies in socially connected regions. The effect is more pronounced among independent, smaller, less reputable, early–stage–focused VC firms and those not from a VC hub. We further document that social connectedness lowers the likelihood of a successful exit since it induces VC firms to undertake suboptimal investment decisions. Overall, our findings highlight the role of social connectedness in constituting the geographical differences in VC firms’ capital allocation and investment outcomes.
Subject: social connectedness; venture capital; capital allocation; investment performance
Identifier: http://hdl.handle.net/${Handle}
Identifier: uon:52342
Identifier: ISSN:0378-4266
Language: eng
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