Geographical distance, investment strategies and performance of venture capital: evidence from Chinese enterprises

Jiaoe Wang, Fengyuan Liu, Jianjun Li, Delin Du and Jiafan Wu

Spatial Economic Analysis, 2025, vol. 20, issue 1, 8-32

Abstract: A growing body of evidence suggests that geographical distance plays an important role for venture capital (VC) investment. This study explores whether and how the geographical distance between the lead VC firms (VCFs) and the invested entrepreneurial firms (IEFs) influences the investment strategies of VCFs and their performance. The results show: (1) The geographical distance has a significant positive effect on the performance of VC investments. (2) As distance increases, lead VCFs will tend to be conservative on investments by improving project screening criteria and adopting syndication strategies and multiple-rounds of staged financing, which can dramatically improve the successful exit from the invested projects. This study has useful theory and policy implications for VCFs, entrepreneurial firms and local governments.

Date: 2025
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DOI: 10.1080/17421772.2024.2342336

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