Do alumni have an advantage? Evidence from venture capital investment
Qiang Liu, Jian Liang, Guowan Yan
Keywords:
venture capitalists, competitiveness, alumni relationship, pre-investment decisions, post-investment performance
Abstract:
The role of venture capital in enhancing enterprise competitiveness and driving sustainable development is well acknowledged. However, the intricacies of how venture capitalists formulate investment decisions receives limited attention within the existing literature. This study addresses this gap by leveraging comprehensive investment event-level data from the Chinese context. Our focus is on investigating alumni relationships’ influence on venture capitalists’ investment choices and assessing their post-investment performance. To achieve this, we developed a matching approach based on the methodology proposed by Chung et al. (2018). Specifically, we used propensity score matching (PSM) to pair each alumni-related investment observation with a non-alumni-related investment observation, employing nearest-neighbor matching with replacement. This process resulted in a matched sample of 2,356 observations, which we used to estimate the likelihood of alumni-related investments. Furthermore, we conducted an empirical analysis of the economic consequences of venture capital investments using multivariate regression on the actual alumni-related investment sample. Our analysis yields several key findings: First, we observe a discernible inclination among venture capitalists towards investing in firms connected through alumni relationships. Second, investments facilitated by such alumni connections demonstrate notably superior post-investment performance compared to those lacking such affiliations. Third, these alumni relationships elevate the probability of venture capitalists opting for subsequent reinvestments and amplify the likelihood of successful exits through initial public offerings. Collectively, our findings underscore the crucial role of alumni networks in the allocation of investment resources and the enhancement of competitiveness. These results can provide valuable practical guidance for venture capital institutions and entrepreneurs.
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 Do alumni have an advantage? Evidence from venture capital investment [PDF file] [Filesize: 362.42 KB]
 10.7441/joc.2025.01.03
iu, Q., Liang, J., & Yan, G. (2025). Do alumni have an advantage? Evidence from venture capital investment. Journal of Competitiveness, 17(1), 38-54. https://doi.org/10.7441/joc.2025.01.03
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