The Impact of Geographic Distance between Venture Capital and Start-ups on Operating Performance

Business School, Sichuan University, Chengdu 610065, People’s Republic of China

^* e-mail: 1669405296@qq.com

Abstract

China has a vast territory, and the development scale of venture capital varies significantly among different regions. The geographical distribution of venture capital is unbalanced, which makes it difficult for venture capital to choose to invest in local enterprises or cross-regional investment. Many studies have shown that geographical distance is related to the formation of social networks, the strength of information asymmetry and the amount of transaction costs. Therefore, depending on geographical distance, venture capital will face different investment situations, investment costs and investment returns, and entrepreneurial enterprises will therefore receive different levels of super-vision, value-added and post-investment management services. Therefore, this paper analyses the impact of geographical distance between VCs and start-ups on the operating performance of start-ups from a unique geographical distance perspective, and takes relevant data of listed start-ups from 2009 to 2019 as samples for empirical test. The study finds that the closer the geographical distance between VCs and start-ups, the higher the short-term operating performance of start-ups. Geographical distance has an insignificant effect on the long-term performance of startups. In addition, poor internal control of start-ups will weaken the positive impact of geographical proximity on operating performance of start-ups.