Mitigating information asymmetry to acquire venture capital financing for digital startups in China: The role of weak and strong signals

IF 6.5 2区 管理学 Q1 INFORMATION SCIENCE & LIBRARY SCIENCE
Yuxue Yang, Yulin Fang, Nianxin Wang, Xiang Su
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引用次数: 2

Abstract

This paper addresses how weak and strong signals affect venture capital funding acquired by digital startups at their early stage in various industries of China. We also articulate the interaction mechanism of these strong and weak signals by demonstrating their complementary or substitutive effects in alleviating information asymmetry on startup quality, which can help digital startups secure venture capital financing. Drawing on signalling theory and institutional legitimacy theory, we introduce application (app) downloads as a novel strong signal that can reduce market legitimacy concerns, and previous-round venture capitalist reputation as a traditional strong signal that mitigates regulatory legitimacy concerns. We treat founders' startup and IT experience as weak signals, as they provide rhetorical and indirect information indicating a startup's potential to establish regulatory and market legitimacy. The study empirically investigates our hypotheses using data of 163 digital startups in various industries of China. Results confirm the positive relationships between strong signals and venture capital funding secured by a digital startup. Furthermore, signals of similar strength are found to complement each other's effects in certain situations, while strong signals can reduce the effects of weak signals on a digital startup's financing performance under specific conditions that create these mixed effects. Implications for digital startup research and practice as well as limitations and suggestions for future research are discussed.

缓解信息不对称为中国数字创业公司获得风险投资融资:弱信号和强信号的作用
本文探讨了弱信号和强信号如何影响中国各行业数字创业公司早期获得的风险投资资金。我们还阐明了这些强信号和弱信号的相互作用机制,展示了它们在缓解信息不对称对创业质量的影响方面的互补或替代作用,这可以帮助数字创业公司获得风险投资融资。根据信号理论和制度合法性理论,我们引入了应用程序下载作为一种新的强烈信号,可以减少市场合法性问题,并引入了上一轮风险投资家的声誉作为一种传统的强烈信号来减轻监管合法性问题。我们将创始人的创业和IT经验视为微弱信号,因为它们提供了修辞和间接信息,表明创业公司有可能建立监管和市场合法性。本研究使用中国各行业163家数字创业公司的数据对我们的假设进行了实证调查。研究结果证实了强信号与数字创业公司获得的风险投资资金之间的积极关系。此外,在某些情况下,强度相似的信号可以互补效应,而在产生这些混合效应的特定条件下,强信号可以减少弱信号对数字初创公司融资绩效的影响。讨论了对数字创业研究和实践的启示,以及对未来研究的局限性和建议。
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来源期刊
Information Systems Journal
Information Systems Journal INFORMATION SCIENCE & LIBRARY SCIENCE-
CiteScore
14.60
自引率
7.80%
发文量
44
期刊介绍: The Information Systems Journal (ISJ) is an international journal promoting the study of, and interest in, information systems. Articles are welcome on research, practice, experience, current issues and debates. The ISJ encourages submissions that reflect the wide and interdisciplinary nature of the subject and articles that integrate technological disciplines with social, contextual and management issues, based on research using appropriate research methods.The ISJ has particularly built its reputation by publishing qualitative research and it continues to welcome such papers. Quantitative research papers are also welcome but they need to emphasise the context of the research and the theoretical and practical implications of their findings.The ISJ does not publish purely technical papers.
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