Network, reputation, VC-financing: SME in Zhongguancun and Silicon Valley

Abstract

Purpose This paper aims to investigate if the collaboration intensity of the company with local and international stakeholders facilitates the attracting of venture capital (VC) financing. The reputation of the company was incorporated as a factor, which can potentially influence investment decision-making. The study also aims to make a cross-national comparison of new ventures financing in two innovation regions – Chinese Zhongguancun and American Silicon Valley. Design/methodology/approach Quantitative methodology involving data gathered from 176 venture-backed as well as non-venture backed SME located in Chinese Zhongguancun and American Silicon Valley was applied. The data has been gathered through a survey. A logistic regression model has been adopted to test the hypotheses and explore relationships among concerned variables. Findings The results spotlight that collaboration intensity with the company’s domestic stakeholders could enhance the attractiveness of the company for external investments. Collaboration intensity with foreign stakeholders increases the likelihood of acquiring financial support only for Chinese companies. For American companies, the reputation of their stakeholders did not show a significant effect. However, positive reputation acquired from the Chinese company’s stakeholders enhances the chance of getting funding and moderates the investment effect of collaboration intensity with domestic stakeholders. Originality/value This paper unfolds that the network strength and the reputation of the SME could play the role in getting VC investment. The results are shown in two different contexts (Silicon Valley in the USA and Zhongguancun in China), characterizing the completely different cultural, legal, institutional and operating environments.