Stay or switch? The impact of venture capitalists' movement across network communities on enterprises' innovation performance

Venture capital (VC) has an important function in stimulating economic prosperity and innovation. However, the high risk and intensive resource requirements make VC challenging, motivating venture capitalists (VCs) to form network communities to alleviate risk and share resources. VC network communities are involved in a dynamic process that depends upon member turnover. This study investigates the VC network communities from the investors' movement across VC network communities' perspective and examines this movement behavior on their VC performance, measured by the enterprises' innovation. We found that the investors' movement across network communities has an inverted U-shape effect on enterprises' innovation. In addition, the experience of the VCs and the higher level of clustering of the network community make the inverted U-shape curve steeper and make the turning point to the left. Our findings urge VCs to utilize the advantages from both intra- and extranetwork communities and consider their stability and mobility, especially when they are more experienced and the network community has a higher clustering level. Therefore, their investment performance, in terms of the enterprise's innovation, can be enhanced.

Automated summary

Venture capital plays a vital role in promoting economic prosperity and innovation. To overcome the high risks and resource requirements, venture capitalists form network communities to share resources and mitigate risks. This study explores the movement behavior of investors across VC network communities and its impact on VC performance, measured by enterprises' innovation. The findings reveal an inverted U-shaped effect, indicating that moving between network communities has both positive and negative effects on innovation, influenced by VC experience and network community clustering level.