Social Capital at Venture Capital Firms and Their Financial Performance in China

Abstract

By using social network analysis, this paper studies the extent to which social capital drives performance in the Chinese venture capital (VC) market and explores the trend toward VC syndication in China. First, this paper proposes a hybrid model based on syndicated social networks and the latent-variable model, which describes the social capital at VC firms and builds relationships between social capital and performance at VC firms. Then, this paper builds three hypotheses about the relationships and test the hypotheses using our proposed model. Some numerical simulations are given to support the test results. Finally, this paper shows the correlations between social capital and financial performance at VC firms which are weak in China due to the lack of mature social capital links.