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Developing venture capital when institutions change

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  • David Lingelbach

Abstract

This paper investigates the impact of formal institutional change on the venture capital (VC) development process. Specifically, it contrasts VC development processes taking place in stable and volatile formal institutional environments. It shows that formal institutional change - both improvement and decline - facilitates the VC development process, and that more change is more beneficial to that process than less change. Macro institutional change plays a larger role in facilitating the VC development process than micro institutional change, and changes in two macro-level dimensions - rule of law and political stability - have the largest positive impact on that process. Employing longitudinal interview and archival data from four emerging economies with a range of institutional change and quality levels, Botswana, Indonesia, Pakistan, and South Africa, empirical support is provided for the propositions.

Suggested Citation

  • David Lingelbach, 2015. "Developing venture capital when institutions change," Venture Capital, Taylor & Francis Journals, vol. 17(4), pages 327-363, October.
    • Handle: RePEc:taf:veecee:v:17:y:2015:i:4:p:327-363
    DOI: 10.1080/13691066.2015.1055060
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    References listed on IDEAS

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    1. Nadeem Ul Haque, 2007. "Entrepreneurship in Pakistan," PIDE-Working Papers 2007:29, Pakistan Institute of Development Economics.
    2. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006," Policy Research Working Paper Series 4280, The World Bank.
    3. Nadeem Ul Haque, 2007. "Entrepreneurship in Pakistan," Microeconomics Working Papers 22190, East Asian Bureau of Economic Research.
    4. Cumming, Douglas J. & Johan, Sofia A., 2013. "Venture Capital and Private Equity Contracting," Elsevier Monographs, Elsevier, edition 2, number 9780124095373.
    5. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2006. "Governance matters V: aggregate and individual governance indicators for 1996 - 2005," Policy Research Working Paper Series 4012, The World Bank.
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    Cited by:

    1. Aleenajitpong, Natdanai & Leemakdej, Arnat, 2021. "Venture Capital Networks in Southeast Asia: Network characteristics and cohesive subgroups," International Review of Financial Analysis, Elsevier, vol. 76(C).
    2. Motavaseli Mahmood & Shojaei Saeed & Bitaab Ali & Hasti Chitsazan & Ghanbar Mohammadi Elyasi, 2018. "Institutional Barriers to Financing Technology-based Small Firms through Venture Capital Mechanism: A Study to Explore the Incentives for Investment in Iran," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 184-195.
    3. Ethné M. Swartz & Frances M. Amatucci & Jonathan T. Marks, 2019. "Contextual Embeddedness As A Framework: The Case Of Entrepreneurship In South Africa," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-24, September.

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