Cross-Border Venture Capital Flows and Local Ties: Evidence from Developed Countries
Journal
Quarterly Review of Economics and Finance
Type
journal article
Date Issued
2011
Author(s)
Abstract
© 2010 The Board of Trustees of the University of Illinois. Using a unique global dataset from developed countries, this paper provides evidence that not only traditional determinants of international capital flows affect cross-border venture capital flows, but that ties among local venture capital investors are related to size and style of these flows. Our results on size indicate that both number and value of cross-border flows between two countries increase with tie intensities within the local venture capital industries in both countries. Our results on style suggest that strong local ties go hand in hand with more intensive ties to foreign investors. Thus, rather than protecting the local market and fending off competition from foreign investors, local tie intensity seems to stimulate international syndication and expansion of venture capital financing across borders, which allows venture capital investors to build geographically diversified portfolios and to add value by building cross-border syndicates. These effects seem to be stronger for those foreign investors who already have experience in the particular destination country.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Volume
51
Start page
36
End page
48
Pages
12
Subject(s)
Division(s)
Eprints ID
259432