To test our hypotheses, we primarily collected archival data from one major VC data source in China,
Zero2IPO, triangulated with ChinaVenture. We also substantiated archival data with more than 30 personal
interviews with various stakeholders such as entrepreneurs and venture capitalists. Event history analyses
of approximately
8 000 VC deals made in China between 2001 and 2010 reveal that when similar
investments increase, a VC firm is more likely to exercise its discretion over investment termination.
Moreover, deal network embeddedness and brokerage advantage negatively and positively moderate the
relationship between similar investments and propensity to terminate an earlier investment, respectively.
The findings provide important implications for the literature on strategic decision making and
entrepreneurial finance. Our study suggests that the power balance relationship is a critical factor that
contributes to the investment decision that goes beyond economic consideration. For the invested
companies or start-ups, the structural change of a VC firm’s portfolio may provide signals to predict the
likelihood of the VC firm’s termination decision. In addition, our research setting – the VC industry in
China – not only extends the applicability of the resource dependence and network embeddedness
perspectives, but also offers practical implications for VC investment management in an emerging
economy context.
Dr Yanfeng ZHENG
School of Business
The University of Hong Kong
yzheng@business.hku.hk