Abstract:

This study investigates how venture capital (VC) institutions develop dynamic capabilities in response to environmental uncertainty, with a focus on the motivational conflict between exploitation and exploration. Using constructivist grounded theory and theoretical sampling, we analysed ten in-depth interviews with Chinese VC partners from market-oriented funds, state-owned platforms and corporate VCs. Six interrelated capability dimensions were identified: opportunity generation; due diligence; governance design; ecosystem orchestration; organisational learning; and exit navigation. The motivational configuration — controlled motivation (external pressure and loss aversion) versus autonomous motivation (intrinsic interest and value identification) — functions as the 'activation switch', determining which capabilities are deployed and how. Through process tracing of three longitudinal cases, we reveal two evolutionary pathways: upward spirals (proactive foresight through meta-motivational capacity) and downward spirals (decision inertia through overcompensation). We propose 'stage-contingent tilting' as a contextualised correction to March's static balance framework, demonstrating that VC success requires dynamic imbalance — excessively tilting towards exploration during technological inflection points and towards exploitation during liquidity crises. This study extends dynamic capability theory to financial services, integrates self-determination theory as a micro foundation and offers practical guidance for VC transformation during China's hard-landing transition.

Please choose your submission type: Full Paper

Primary Track: Entrepreneurship

Keywords: Entrepreneurship Theories;International entrepreneurship

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Dr. Xiaoyu Wang