1. ¹Harvard University, Cambridge, USA
2. ²Guanghua School of Management, Peking University, Beijing, P.R. China

Correspondence: B Batjargal, Harvard University, Davis Center, Room S301, 1730 Cambridge Street, Cambridge, MA 02138, USA. Tel: 617 495 4037; Fax: 617 495 8319; E-mail: batjarg@fas.harvard.edu

Received 8 June 2004; Revised 9 November 2005; Accepted 16 February 2007; Published online 19 July 2007.

Abstract

This article examines the effects of dyadic ties and interpersonal trust on referrals and investment decisions of venture capitalists in the Chinese and Russian contexts. The study uses the postulate of transitivity of social network theory as a conceptual framework. The findings reveal that referee–venture capitalist tie, referee–entrepreneur tie, and interpersonal trust between referee and venture capitalist have positive effects on referrals and investment decisions of venture capitalists. The institutional, social and cultural differences between China and Russia have minimal effects on referrals. Interpersonal trust has positive effects on investment decisions in Russia.