Modeling venture capital networks in hospitality and tourism entrepreneurial equity financing: An exponential random graph models approach

Abstract

This study examines how venture capital (VC) networks form when financing hospitality and tourism start-ups. We propose that networks form as a result of exogenous attributes along with endogenous dependencies, which have been largely under-studied in the hospitality and tourism finance literature. Using a purposefully developed dataset of 644 VC investment deals, this study employed exponential random graph models (ERGMs) to examine how homophily in VC investor-specific attributes influences the tie formation, and to model the likelihood of future tie formation in VC networks in terms of endogenous dependencies. Results reveal that homophily among VC investors increases the likelihood of tie formation, while the establishment of future ties shows a significant tendency of multiple triangulation and connectivity in VC networks. The study provides insights into entrepreneurial equity financing from the VC perspective. It advances the network research and methodology by revealing the underlying structural processes of network formation through ERGMs.