This thesis aims to analyze the investment behavior and performance of venture capital firms in Korea. Unit of analysis is divided into two levels - individual venture capital investment level and individual venture capital firm level.
For the individual venture capital investment level, first, the validity of current evaluation model is tested by directly comparing the relative importance of evaluation on the funding decision factors with the relative weights of influencing factors on the empirical venture performance. Second, the effectiveness of post-investment supportive activities is examined by considering the types and the extent of involvement as independent, and also the characteristics of invested ventures as contingent.
Next, for the individual venture capital firm level, this study typologizes venture capital firms into four types, and analyzes the differences of investment behavior among these four types. Venture capital firms are categorized by the size of investment amounts under management relative to their capital, and the rate of technological innovativeness in their portfolio invested.
ⅰ) Investment leader firms are the ones which have a high rate of investment amounts and a high rate of innovativeness in their portfolio.
ⅱ) Finance-oriented firms are the ones which have a high rate of investment amounts and a low rate of innovativeness in their portfolio.
ⅲ) Technology-oriented firms are the ones which have a low rate of investment amounts and a high rate of innovativeness in their portfolio.
ⅳ) Investment avert firms are the ones which have a low rate of investment amounts and a low rate of innovativeness in their portfolio.
By reviewing and integrating the existing studies, potentially important categories of variables relating investment activities are identified such as firm's characteristics, the obstacles in investment activities, evaluation factors, the characteristics of portfolio, the types and extent of supportive activities, and performance of firms.
The research model reasons the relationships between the behavioral characteristics of the above variables and the four types of firms, and suggests research propositions.
Data are collected from 37 venture capital firms among 56 formal participants in Korea. Questionnaire consists of two types. Type A asks to respond the general characteristics of firms, and Type B asks to rate on three cases: i) one of the most successful ventures, ii) one of the least successful ventures, and iii) the one of rejected ventures.
The major findings are as follows.
First, on the level of individual investment;
1) There are differences between the relative importance of the evaluation factors on the funding decisions and the relative importance of influencing factors on the empirical venture performance.
2) Venture capital firms do not show the systematic relationship between the involvement in a number of supportive activities and the contingent characteristics of funded ventures.
Next, on the level of individual venture capital firms;
Four types of venture capital firms show differents in some aspects about as the importance of evaluation factors, the characteristics of portfolio, and the extent and content of supportive activities. However, four types of firms do not show different patterns in other parts of investment aspects such as the characteristics of firms, the obstacles in investment activities, and the performance of firms.
These findings provide several implications as follows.
First, in the theoretical contribution, this study is the first attempt to categorize the types of venture capital firms and to explore the characteristics of these firms in terms of potentially important variables of investment activities. The test on the validity of current evaluation models, also gives a new methodologies to pursue adequate investment approaches which might be different across diverse investment environments.
Second, in the practical aspects, this study provides some valuable implications:
ⅰ) For the entrepreneurs, the result which shows the different weights of evaluation factors and different extents of supportive activities among venture capital firms, suggests the need for selective application to the venture capital.
ⅱ) For the venture capital firms, the study provides the directions of long-range planning with regard to to their strategic positions.
ⅲ) For the policy-makers, this study suggests the need for different supportive considerations for the venture capital firms.