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National distances, international experience, and venture capital investment performance

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  • Li, Yong
  • Vertinsky, Ilan B.
  • Li, Jing

Abstract

This study examines how the performance of cross-border venture capital investments is affected by national institutional and cultural distances between the environments of venture capitalists (VCs) and investee ventures. We propose that institutional and cultural distances will decrease VCs' effectiveness in conducting venture capital activities and negatively affect investment performance in terms of exit success, and obtain supportive evidence while controlling for geographic distance. We further analyze how VCs can use their international experience to mitigate the negative consequences of national distances. We find that while broad international experience in diverse countries attenuates the deleterious effects of institutional distance in a significant way, it does not have a similar impact in attenuating the negative effects of cultural distance.

Suggested Citation

  • Li, Yong & Vertinsky, Ilan B. & Li, Jing, 2014. "National distances, international experience, and venture capital investment performance," Journal of Business Venturing, Elsevier, vol. 29(4), pages 471-489.
  • Handle: RePEc:eee:jbvent:v:29:y:2014:i:4:p:471-489
    DOI: 10.1016/j.jbusvent.2013.08.002
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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. repec:wsi:ijitmx:v:14:y:2017:i:06:n:s0219877017500316 is not listed on IDEAS
    3. Bock, Carolin & Schmidt, Maximilian, 2015. "Should I stay, or should I go? – How fund dynamics influence venture capital exit decisions," Review of Financial Economics, Elsevier, vol. 27(C), pages 68-82.
    4. Trąpczyński, Piotr & Banalieva, Elitsa R., 2016. "Institutional difference, organizational experience, and foreign affiliate performance: Evidence from Polish firms," Journal of World Business, Elsevier, vol. 51(5), pages 826-842.
    5. Chemmanur, Thomas J. & Hull, Tyler J. & Krishnan, Karthik, 2016. "Do local and international venture capitalists play well together? The complementarity of local and international venture capitalists," Journal of Business Venturing, Elsevier, vol. 31(5), pages 573-594.
    6. Cumming, Douglas & Zhang, Yelin, 2016. "Alternative investments in emerging markets: A review and new trends," Emerging Markets Review, Elsevier, vol. 29(C), pages 1-23.

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