Does Social Proximity Enhance Business Partnerships? Theory and Evidence from Ethnicity's Role in US Venture Capital

• 成果类型: Article
• 署名作者: Hegde, Deepak; Tumlinson, Justin
• 署名单位: New York University; University of Munich; Leibniz Association; Ifo Institut
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1878
• 发表日期: 2014
• 页码: 2355-2380
• 关键词: venture capital; entrepreneurship; Homophily; Social capital; social networks

摘要

W e develop a formal model to understand the selection and influence effects of social proximity (homophily) between business partners. Consistent with the model's predictions, we find that U.S. venture capitalists (VCs) are more likely to select start-ups with coethnic executives for investment, particularly when the probability of the start-up's success appears low. Ethnic proximity between VCs and the start-ups they invest in is positively related to performance, measured by the probability of the companies' successful exit through acquisitions and initial public offerings (IPOs) and net income after IPO. Two-stage regression estimates suggest that these positive performance outcomes are largely due to influence, that is, superior communication and coordination between coethnic VCs and start-up executives after the investment. To the extent that VCs expect to work better with coethnic start-ups, they invest in coethnic ventures that are of lower observable quality than noncoethnic ventures.