Venture capital firms and their syndicated network position: the importance of national culture A comparative study between a collectivistic and an individualistic setting

Abstract

The aim of this research was to explore whether a favorable venture capital network position is determined by national culture. The literature used in this research consists of social network theory, venture capital network syndication and Hofstede’s cultural dimension collectivism versus individualism. It was expected that especially strong network relationships increase the performance of venture capital firms in a collectivistic country, while structural holes and weak ties were expected to do essentially well in an individualistic country. The methodology strategy consisted of a comparative study, which helped to create two samples that represent a collectivistic, as well as an individualistic culture. Next, a regression analysis was conducted for both samples to measure the impact of strong- and weak ties, while also maintaining several control variables in the model. The results showed that indeed in a collectivistic society, strong ties are more beneficial for venture capital firms and the startups they invest in. However, in an individualistic society, no significant result was found, therefore indicating that neither strong- or weak ties prove to be more beneficial for venture capital firms. With these results, it can be stated that national culture does influence the favorable network position for venture capital firms. However, a concrete favorable network position can only be proposed in a highly collectivistic culture.