THE EFFECT OF INTERDEPENDENT RELATIONSHIP ON NEW INVESTOR'S INVESTMENT PERFORMANCE

Abstract

This thesis examines the effect of interdependent relationship on new investor’s investment performance. Based on the ecological theory, this study argues that the interdependent relationship of new investors and syndicates’ incumbent members can have two kinds of effects on new investors: mutualistic effect and competitive effect simultaneously. While mutualistic effect will have a positive effect on new investors’ investment performance, competitive effect will have a negative effect on new investors’ investment performance. There are four different kinds of interdependent relationship: investment domain overlap; geographic proximity; complementarity human capital; supplementary human capital. These four kinds of interdependent relationship can bring about competitive effect as well as mutualistic effect. Although competitive effect and mutualistic effect can affect new investors’ performance, they grow at different rates with interdependent relationship increase. Based on the logic of ecological theory, this study augers that when the level of interdependent relationship is low, mutualistic effect plays the dominated effect on the investors’ performance as interdependent relationship increases. However, because of the restriction of environmental capacity, the mutualistic effect on new investors’ performance will increase at decreasing rate as interdependent relationship increases, in other words, the marginal increase of mutualistic effect on new investors’ investment decreases with interdependent relationship increase. When interdependent relationship increases to a certain point, further increase in interdependent relationship will lead to competition effect which will play the dominated effect on new investors’ performance. Meanwhile, the marginal effect of interdependent relationship can lead to lower level of new investors’ performance. Taking all these mutualistic effect and competitive effect on new investors’ performance into consideration, this study develops the hypotheses of the Inverted U-sharped relationship between the four dimensions of interdependent relationship on new investors’ performance. In addition, using the concept of network faultline and organizational embeddedness, this study argues that network fautline and organizational embeddedness can moderate the Inverted U-sharped relationship of interdependent relationship and new investors’ performance. High level of network Faultline will amplify the inverted U-sharped relationship between interdependent relationship and new investors’ performance, in other words, the positive effect of mutualistic effect on new investors’ performance at low level of interdependent relationship and the negative effect of competitive effect on new investors’ performance at high level of interdependent relationship will be both stronger in syndicates with high level of Faultline than in those with low level of Faultline. Furthermore, high level of organizational embeddedness of width will amplify the inverted U-sharped relationship between interdependent relationship and new investors’ performance, in other words, the positive effect of mutualistic effect on new investors’ performance at low level of interdependent relationship and the negative effect of competitive effect on new investors’ performance at high level of interdependent relationship will be both stronger in syndicates with high level of organizational embeddedness of width than in those with low level of organizational embeddedness of width. In addition, high level of organizational embeddedness of breadth will amplify the inverted U-sharped relationship between interdependent relationship and new investors’ performance, in other words, the positive effect of mutualistic effect on new investors’ performance at low level of interdependent relationship and the negative effect of competitive effect on new investors’ performance at high level of interdependent relationship will be both stronger in syndicates with high level of organizational embeddedness of breadth than in those with low level of organizational embeddedness of breadth. Based on longitudinal data, the hypotheses of this thesis are supported by the longitudinal data. Theoretical and managerial implications are discussed at the end of this thesis.