17 Apr 2025
Recently, a paper titled "Institutions, Uncertainty, and Venture Capital Staged Investments in ICT Start-ups" co-authored by Dr Bingqing Zhao from the International Business School Suzhou (IBSS) at Xi’an Jiaotong-Liverpool University (XJTLU) and her collaborators has been accepted and published in the European Management Journal, a CAS Tier 2 journal. The article explores how institutional environments influence venture capitalists’ follow-on investment decisions under high technological uncertainty.
Focusing on venture capital activities in China’s Information and Communication Technology (ICT) sector, the study reveals that technological uncertainty exerts a significant negative impact on venture capitalists’ follow-on investments in emerging economies. Specifically, when technological uncertainty is high, venture capitalists tend to reduce or halt subsequent investments in start-ups. This is attributed to the fact that technological uncertainty not only increases project failure risks but also diminishes the potential returns of follow-on investments. The research further identifies two critical institutional factors—the pace of market-oriented reforms and the density of government venture capital (GVC)—that significantly moderate the relationship between technological uncertainty and investment decisions. Findings indicate that faster market-oriented reforms encourage venture capitalists to continue investing despite technological uncertainty, as such reforms reduce institutional ambiguity and enhance resource allocation efficiency. Conversely, a higher density of government venture capital discourages follow-on investments under technological uncertainty, as government intervention amplifies investment risks.
This research offers practical insights for venture capitalists and policymakers. For venture capitalists, it underscores the need to evaluate both technological uncertainty and the institutional environment—particularly the speed of market-oriented reforms and the extent of government intervention—when making follow-on investment decisions. For policymakers, accelerating market-oriented reforms and minimizing government intervention can stimulate venture capital inflows, fostering technological innovation and economic growth. The research team recommends that policymakers in emerging economies prioritize creating a more transparent and stable institutional environment to attract venture capital and support start-up development.
Dr Bingqing Zhao currently holds the position of Assistant Professor in Innovation and Entrepreneurship at the International Business School Suzhou, Xian Jiaotong-Liverpool University. In 2019, she got her PhD from Cambridge University in Technology Management and Entrepreneurship. After graduation, she joined a postdoc program designed by Tsinghua University and Shenzhen Capital Group, conducting research in venture investment and finance. Her research interests include entrepreneurial decision-making, technology innovation, entrepreneurship, entrepreneur well-being, venture investment and entrepreneurial finance.
The European Management Journal (EMJ) is a flagship scholarly journal, publishing internationally leading research across all areas of management. EMJ articles challenge the status quo through critically informed empirical and theoretical investigations, and present the latest thinking and innovative research on major management topics, while still being accessible and interesting to non-specialists.
17 Apr 2025