The Influence Study Of Syndicate Venture Capital Involvement On The Targeted Company’s Performance

Venture capital is widely recognized as the important source of innovation andentrepreneurship. Venture capital not only provides fund required by entrepreneurship, butalso offers a series of value added activities in the area of management, sales, strategy and soon. Recently, due to the uncertainty of macro-economic development trend and the block ofIPO exit, the venture capital market also show a shrinking trend. To deal with the problemabove, venture capitalists prefer to invest in early ventures program. To reduce investmentrisk, syndicate investment is one of the most often used strategies for venture capitalists tospread the risk and investment diversification.Based on syndicate investment’s advantages in project selection and value added, thisarticle analyzes the effects of syndicate venture capital investment on the targeted company.Compared with existing literature, we develop and enrich the existing study both intheoretical and empirical area. Theoretically, existing study generally analyzed the effects ofventure capital involvement on the targeted company’s performance base one side ofcorporate governance but we study the effects and mechanism systematically and in detailsfrom all kinds of dimensions of corporate governance and R&D investment including equitystructure, board of directors and so on. Empirically, we combine independent sample T-testand regression analysis. Compared to existing study using cross-sectional data, we based onShenzhen GEM’s companies which listed in2009-2010, using2010-2014data to do empiricalanalysis.Through mean statistics and T-test, we find the mean of companies’ performance whichsyndicate venture capital involved is significantly higher than companies without venturecapital involved and also significantly higher than companies which sole venture capitalinvolved. In corporate governance, companies with syndicate venture capital’s support have ahigher mean in the proportion of the first shareholder, ownership control, and scale of boarddirectors and so on. In management incentives, there’s also some difference between thecompanies. In R&D investment, the invested companies by syndicate venture capital have asignificantly higher mean rate of R&D expenditure investment than companies withoutsyndicate venture capital’s support and a lower R&D human resource investment. Regressionresults show venture capital’s involvement has a significantly positive influence on thetargeted company’s performance, which is not agreed with the existing related study and try toexplain the reasons deeply. Regression results also show syndicate venture capital’sinvolvement has a significantly higher positive influence than that of venture capital’sinvolvement. Further study shows syndicate venture capital’s involvement has differentinfluences on the relationship between kinds of dimensions from corporate governance andR&D investment. Based on the results above, we propose some constructive suggestion fromthe view of venture capital investment institution, entrepreneurial firms and government.Finally, we summarize the conclusion, shortcomings and look into the future study.