The paradox of social capital in China: venture capitalists and entrepreneurs’ social ties and public listed firms’ technological innovation performance

ABSTRACT

Contemporary research on entrepreneurship has showed that social capital can improve the success rate of entrepreneurial activities, but focusing too much on social capital can also divert entrepreneurs’ attention to certain firm activities such as technological innovation. The purpose of this study is to explore such a paradox in order to better understand the impact of social capital on firms’ technological innovation performance in China. The current study explores this paradox with the data from 249 public listed Chinese firms that have received venture capital investment. The results show that both venture capitalists’ social ties and entrepreneurs’ social ties negatively affect these firms’ technological innovation performance, including total patents granted, R&D expenditure, and total factor productivity. In other words, venture capitalists’ social ties as well as entrepreneurs’ social ties actually impede, rather than facilitate their firms’ technological innovation. The results also show that entrepreneurs’ social capital mediates the impact of venture capitalists’ social capital on technological innovation performance. Managerial and policy implications for entrepreneurship research and technological innovation are then discussed for future research.

KEYWORDS:

• China
• entrepreneurship
• social capital
• technological innovation
• venture capital

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Dr Zhenzhong Ma is a full professor in management at the Odette School of Business, University of Windsor, Canada. His research focuses on cross-cultural management, business ethics, entrepreneurship, and Chinese management.

Dr Lei Wang is a professor in finance at the School of Business, Jiangnan University, China. His research focuses on venture capital and entrepreneurship.

Dr Keith Cheung is an assistant professor in finance at the Odette School of Business, University of Windsor, Canada. His research focuses on technology and international finance.

ORCID

Zhenzhong Ma http://orcid.org/0000-0003-3012-2810

Additional information

Funding

This study was partially supported by the grants from the Humanities and Social Sciences Project of Ministry of Education, China [grant number 17YJAZH080] and the Jiangsu Qing Lan Project (Su Teacher: #2017–15).