How law,politics and transnational networks affect technology entrepreneurship: Explaining divergent venture capital investing strategies in China |
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Authors: | Douglas B Fuller |
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Institution: | (1) Department of Management, King’s College, University of London, London, UK |
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Abstract: | This article identifies three distinct patterns of investment behavior by venture capital firms investing in technology sector
start-ups in China. The first pattern is the service-oriented, technology-light investment behavior exhibited by the foreign
venture capitalist firms not founded by ethnic Chinese. The second pattern is the technology creation investment pattern exhibited
by foreign firms founded by ethnic Chinese and embedded in ethnic Chinese communities. The third pattern consists of local
state-funded Chinese venture capital firms that choose either to invest in state-directed projects or opt out of investing
in technology start-ups entirely. What explains the differences in behavior between the strictly foreign and the ethnic Chinese-embedded
foreign firms are the different legal environments in which these firms honed their skills. The different learned experience
gained from operating in different environments explains why the foreign firms avoid investing in technology-generating activities
in China whereas the ethnic Chinese firms are willing to do so despite China’s notorious weak intellectual property rights
regime. The political factors influencing the distribution of finance in China explain the behavior and essential failure
of the local state-run venture capital firms. These findings demonstrate that several distinct, separate and non-clashing
institutional arrangements are concurrently operating within China and shaping the behavior of venture capital firms there. |
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Keywords: | |
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