Venture capital reputation and portfolio firm performance in an emerging economy: The moderating effect of institutions

This paper addresses the effects of venture capitalist (VC) reputation on the performance of portfolio firms, and how this works in different institutional settings. Drawing on a dataset of 519 portfolio firms from China, we found that VC reputation does significantly increase the market value of portfolio firms in both the IPO year and the subsequent years. In addition, institutions moderate the relationship between VC reputation and portfolio firm performance such that the effect of VC reputation is positive and significant given extensive rule-based institutions, but insignificant given more relationship-based institutions. Our results provide empirical support for the impact of institutional factors such as market transparency and institutional efficiency on how venture capital firms can add value to invested portfolio firms.