A Research On The Relationship Between Top Management Team Faultline Of Venture Capital And Investment Performance

Going public through an initial public offering(IPO) and acquisition are two ways for successful exits of venture capital firms(VCFs), and VCFs generate returns primarily from these two forms. Venture capitalists can provide full value-creating service and financial support for entrepreneurial start-ups, so the success or failure of these firms may be affected crucially by the VCFs. Much existing research assumes that the venture capitalist is a single entity. Emerging research focuses on the team level. Hence, what kind of TMT structure in which conditions can achieve better performance becomes an issue of common concern to scholars and practitioners. Top management team members of venture capital firms with different learning and working experiences will have different opinions when making investment decisions in uncertainty situations, which lead to TMT faultline and then influence their investment performance. Drawing upon social identity and social-categorization theories and from the view of faultline, this study used multivariate regression analysis to research on the 142 TMT of venture capital firms founded in China and their 2672 risk investment activities during 2007-2011. In the end, we proposed the TMT faultline of VCF based on overseas learning and working experiences, and tested the relationship between this kind of TMT faultline and venture capital investment performance.We find that TMT members with stronger faultline based on overseas learning and working experiences can have more conflicting opinions in making investment decisions, which will lead to team conflicts, and then impact on investment performance. We also find that high reputation of VCF can positively associate with organizational identification, and weaken the negative effect of faultline and performance. What's more, when the VC firm has a better network, the need for interests will make members pay more attention to the collective, which will reduce the conflicts between subgroups, and weaken the negative effect of strong TMT faultline on investment performance. This study extends TMT faultline research to venture capital, which enriches the study of team faultine, and provides some theoretical reference for the VCFs to improve their investment performance.