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Does Syndication With Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?

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  • Tykvová, Tereza
  • Schertler, Andrea

Abstract

Venture capitalists (VCs) face additional risks and costs when they invest in firms located in geographically remote countries or in countries whose institutions differ substantially from those in their home countries. Our study considers foreign VCs' prospect of overcoming these investment obstacles as a rationale for syndicating with local VCs from the investment countries. Through such syndication, foreign VCs may obtain easier access to investment opportunities, improve the risk allocation and face lower information costs. Using a novel dataset of worldwide deals, we draw a diametrically opposed picture for the two kinds of distance: our results lend support to the conjecture that the obstacles of great institutional distance cannot be overcome with the help of a local VC, whereas those of great geographical distance can.

Suggested Citation

  • Tykvová, Tereza & Schertler, Andrea, 2014. "Does Syndication With Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?," Journal of International Management, Elsevier, vol. 20(4), pages 406-420.
  • Handle: RePEc:eee:intman:v:20:y:2014:i:4:p:406-420 DOI: 10.1016/j.intman.2014.09.001
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    Cited by:

    1. Meuleman, Miguel & Jääskeläinen, Mikko & Maula, Markku V.J. & Wright, Mike, 2017. "Venturing into the unknown with strangers: Substitutes of relational embeddedness in cross-border partner selection in venture capital syndicates," Journal of Business Venturing, Elsevier, vol. 32(2), pages 131-144.
    2. Cheng, Cheng & Schwienbacher, Armin, 2016. "Venture capital investors and foreign listing choices of Chinese companies," Emerging Markets Review, Elsevier, vol. 29(C), pages 42-67.
    3. Filatotchev, Igor & Bell, R. Greg & Rasheed, Abdul A., 2016. "Globalization of Capital Markets: Implications for Firm Strategies," Journal of International Management, Elsevier, pages 211-221.
    4. Cumming, Douglas & Henriques, Irene & Sadorsky, Perry, 2016. "‘Cleantech’ venture capital around the world," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 86-97.
    5. Bertoni, Fabio & Tykvová, Tereza, 2012. "Which form of venture capital is most supportive of innovation?," ZEW Discussion Papers 12-018, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    Venture capital; Internationalization; Syndication rationale; Geographical and institutional distance; Moderating effect;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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