A Study On The Relationship Between VC-E Cooperative Governance Mechanism And Technological Innovation Performance

As an important financing mode to support the development of technologicalinnovation, venture capital (VC) has attracted increasing attention by the scholars andentrepreneurs. Although it is general agreement that venture capital’ role in promotingbusiness performance is that the value-added features of the non-financial form ofpost-investment activities,the reseachers have not yet theorized for the relationshipbetweenVC post-investment activities and technological innovation,continuingcontroversy for over20years. Some scholars considered that VC post-investmentactivities has significant positive effect on the technological innovation.Particularly, VCvalue-added service has positive influence on the technological innovation.Somescholars argued that the positive role of VC post-investment activities is not obviousor even hinder the process of technological innovation. Therefore, the value-addedprocess of VC post-investment activities also remains under debate.This study suggests that the cause of different conclusions about the relationshipbetween VC post-investment activities and technological innovation performance is thatscholars have not considered the multi-variable and dynamic model,relying solely onthe two-varible model to explain the direct causal effect of the relationship between VCpost-investment activities and technological innovation performance.Underlying theseissues,the level of analysis is not comprehensive and accurate.In view of this, based on social exchange theory,we first define the relationshipbetween venture ccapitalist and the entrepreneur (VC-E) as the social exchangerelationship which means they should obey the rules of reciprocal and commitment,according to the characteristic of venture capital is a relational investment.Second,weconsider the cooperative relationship of venture capitalist and entrepreneur depend onthe governance mechanism on the basis of network governance theory.Together, fromthe cooperative governance perspective,these two parts of our central question help usto re-understand the relationship between VC post-investment activities andtechnological innovation performance,taking the VC-E cooperative governancemechanism as pre-impact factor. In this paper, we provide three contributions tounderstanding the conditions under which VC-E cooperative mechanism contributes tohigher relative technological innovation performance.(1) based on the transaction cost theory and social exchange theory, from transaction attributes and relationship attributes of investment projects from start-ups,we extract influence factors of VC-E cooperative governance mechanism and examinethe formation and evolution of the VC-E cooperative governance mechanism under theinfluence of these factors.(2)According to the principal-agent theory, resource-based theory and the socialexchange theory, we set up a multi-variable concept model about the relationshipamongVC-Ecooperative governance mechanism,VCpost-investment activities andtechnological innovation performance.Meanwhile,VC post-investment activities isregarded as specific behaviour of VC-E cooperative relationship and considered asmediator.We theorize and examine the influence of VC-E cooperative governancemechanism on technological innovation performance through the VC post-investmentactivities.(3)Studying on moderating variables. From the social exchange theory, we considerprocedural justice, relation conflict and task conflict as moderator and test thesemoderating effective.Through theoretical analysis and empirical testing, using multiple linear regressionand hierarchical regression, we find:(1) Asset specificity, uncertainty, investment attraction and cultural fit is animportant factor affecting in the VC-E cooperative governance mechanisms. The VC-Ecooperative governance mechanism is divided into contractual governance mechanismand the relational governance mechanism, which would be affected differently by assetspecificity, uncertainty, investment attraction and cultural fit. Asset specificity hassignificant positive influence on contractural governance and negative effect onrelational governance.Uncertainty is negative correlative to the contractualgovernance.We fail to observe the relationship between uncertainty and relationalgovernance. Investment attraction has a net negative contribution to contracturalgovernance and net positive effect on relational governance. Cultural fit is negativecorrelative to the contractural governance and positive correlative to the relationalgovernance.(2) The VC-E cooperative governance mechanism has a significant impact ontechnological innovation performance. The influence of contractual governance on thetwo dimensions of technology innovation performance, innovation capability andinnovation output is expressed as the inverted "U" shaped relationship. The relationalgovernance effecting on innovation capability and innovation output are significantly positive.(3) The mediating effective of the VC post-investment activities significantly.Contractual governance, relational governance have contribution to innovationcapability and innovation output through the two dimensions of VC post-investmentactivities,VCsupervision&control and VC value-added service. Contracturalgovernance has positive effect on the VC supervision&control, has an inverted Urelationship with VC value added service. VC supervision&control has an inverted Urelationship with the innovation output. VC supervision&control is negativecorrelative to the innovation capability, which is partially tested by empirical data.Relational governance has negative influence on the VC supervision&control,haspositive effect on VC value-added service that has a positive contribution to innovationcapability and innovation output.(4)The moderating effective of procedural justice and relation conflict is significant,while task conflict as moderator is partially tested. Procedural justice moderatespositively the relationship between VC post-investment activities and technologicalinnovation performance.Relation conflict has negative moderating effective on therelationship between VC post-investment activities and technological innovationperformance. Task conflict moderates positively the relationship betweenVCsupervision&control and innovation capability, and has positive moderatingeffective on the relationship between VC value-added service and innovatin capability.Bue the moderating effective of task conflict on the relationship between VCsupervision&control and innovation output, and on the relationship between VCvalue-added service and innovation output would not be tested by empiricaldata.Therefore,we need to further investigate the moderating effective of task conflicton the technological innovation performance.From the cooperative governance perspective,this paper tries to contribute to thisresearch fild about the relationship among VC-E cooperative governancemechanism,VC post-investment activities and technological innovation performance onbasis of transaction cost theory,principal-agent theory and social exchange theory on thedata of high-tech start-ups in Chengdu,Wuhan,Beijing,Shengzheng,Xinan,Chongqing.We found the following:It is very important for venture capitalist to achive the value ofpost-investment activities under which cooperative relationship between VC and Eshould be established and promoted.Co-operative relationship between VC and E isnecessary for the success of VC post-investment activities and technological innovation performance.While good cooperation would be formed through optimal VC-Ecooperative governance mechanism.Compared with the contracturalgovernance,relational governance is more contribution to the good cooperativerelationship between VC and E.Further,relational governance appears to positivelyaffect technological innovation through promoting VC post-investment activities.Thistheoretical framework acts as a counter weight to most previous studies on the VC-Erelationship that have emphasized contractural governance in order to build partnercooperation without sufficient consideration of how relational governance affect thepartner cooperation.Meanwhile,the research promotes scholars and entrepreneurs tounderstand the meaning of various governance mechanisms and develops deeply thetheoretical framework of VC-E relationship in order to balance relationship betweencontractural governance and relational governance. The study is the furtherdevelopment of the theory of venture capital and entrepreneurship management, whichhas a certain reference and guide value for the cooperative relationships between VCand E.