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Unlocking AI growth in emerging economies: The role of cross-border venture capital

Author

Listed:
  • Yin, Hua-Tang
  • Tang, Kai

Abstract

AI-investment growth remains constrained by technical complexity and information incompleteness. Leveraging the complementarities of AI venture capital (VC) across broader scopes proves crucial for the AI industry's expansions. We design a state-dependent local projection strategy to investigate the dynamic interplay between cross-border and domestic AI VC in emerging economies, based on a panel dataset spanning 2015–2025. While emerging economies' AI VC is vulnerable to frequent exogenous shocks, it exhibits a symbiotic relationship with cross-border AI VC over the long run. They reinforce and complement each other, but the dynamic impact of cross-border AI VC on domestic AI VC is more pronounced than the reverse in the short and medium run. Improved AI governance, enhanced AI-training dataset accessibility, and relaxed FDI restrictions in fabricated metal industries push the dynamic path of the response difference between non-China emerging economies and China toward zero. Moreover, the response paths triggered by positive and negative changes of cross-border AI VC exhibit asymmetry. Accordingly, we provide policy implications to foster growth in AI VC for emerging economies.

Suggested Citation

  • Yin, Hua-Tang & Tang, Kai, 2026. "Unlocking AI growth in emerging economies: The role of cross-border venture capital," Pacific-Basin Finance Journal, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:pacfin:v:98:y:2026:i:c:s0927538x26001356
    DOI: 10.1016/j.pacfin.2026.103189
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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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