Networks vs. Market Methods in High-Tech Venture Fundraising: The Impacts of Institutional Environment

Entrepreneurship & Regional Development, 20 (September): 409-430, 2--8

23 Pages Posted: 23 Apr 2012 Last revised: 8 Feb 2016

See all articles by Jing Zhang

Jing Zhang

Old Dominion University

Poh-kam Wong

Independent

Date Written: 2008

Abstract

This study examines how institutional environmental factors, including cultural norm, state regulatory system and venture capital market, influence the high-tech entrepreneur’s choice for using network vs. market methods when approaching prospective investors at the early stage of their new venture creation. We collected comparative data through on-site interviews and questionnaire survey with 128 high-tech entrepreneurs in Singapore (a newly industrialised economy) and 250 in Beijing, China (an emerging economy). Our findings suggest that a culture emphasising the value of social obligation, the under-development of the legal/regulatory system and the immaturity of the venture capital market increased the proclivity of entrepreneurs to use network methods. Moreover, entrepreneurs who value networks higher in social obligation than in information transfer are more likely to choose personal ties instead of business ties. This study enhances our understanding of how high-tech entrepreneurs in emerging economies choose between networks and market methods in venture fundraising, and offers suggestions on how public policy makers in these economies can improve the institutional environment of their regions to promote high-tech new venture creation.

Keywords: entrepreneurial finance, venture capital, social network, network utilisation, Singapore, China

Suggested Citation

Zhang, Jing and Wong, Poh-kam, Networks vs. Market Methods in High-Tech Venture Fundraising: The Impacts of Institutional Environment (2008). Entrepreneurship & Regional Development, 20 (September): 409-430, 2--8, Available at SSRN: https://ssrn.com/abstract=2045079

Jing Zhang (Contact Author)

Old Dominion University ( email )

Norfolk, VA 23529-0222
United States

Poh-kam Wong

Independent

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