How does candidate-specific information affect nationality discrimination in new venture funding?
03 Nov 2023 (Fri)
9:00am – 10:30am
Online via Zoom
Mr Wei Xia, University of Washington

I will present my dissertation exploring how candidate-specific information affects nationality discrimination in new venture funding. The first paper of my dissertation, published in Administrative Science Quarterly, considers when candidate-specific information reduces nationality bias. When a Chinese venture capital firm initiates a collaborative first move by including a U.S. venture capital firm in an investment syndicate, the U.S. firm no longer prefers comparably familiar U.S. firms over the Chinese firm. Such familiarity doesn’t trigger impartiality, however, when a U.S. firm initiates a collaborative first move by including a Chinese firm in an investment syndicate, as the Chinese firm subsequently remains partial to comparably familiar Chinese firms.

The second paper of my dissertation considers when candidate-specific information increases nationality discrimination. I find that foreign candidates who are highly reputable are more likely to experience discrimination. When evaluators discriminate against candidates due to their distaste for specific demographic traits (e.g., gender, nationality), they risk imposing performance penalties on their organizations; that is, the difference between the performance of their favored candidate and the potentially superior performance of the candidate they discriminate against. However, the risk and relevance of prospective performance penalties, as perceived by evaluators, are reduced when they are selecting from highly reputable competing candidates. In accordance with prospect theory, an evaluator’s aversion to loss will be lower and, thus, less apt to deter them from discriminating against candidates who have demographic traits that they disfavor. This paper uses the Chinese venture capital sector to investigate these dynamics. When Chinese new ventures select from reputable venture capital investors to secure their initial investment, they tend to select a Chinese venture capital firm over an equally or more reputable U.S. venture capital firm, particularly when the new venture is based in a weakly cosmopolitan province where anti-foreigner sentiments are pervasive.