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Cross-border venture capital flows and local ties: Evidence from developed countries

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  • Tykvová, Tereza
  • Schertler, Andrea

Abstract

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.

Suggested Citation

  • Tykvová, Tereza & Schertler, Andrea, 2011. "Cross-border venture capital flows and local ties: Evidence from developed countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 36-48, February.
  • Handle: RePEc:eee:quaeco:v:51:y:2011:i:1:p:36-48
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    4. Espenlaub, Susanne & Khurshed, Arif & Mohamed, Abdulkadir, 2015. "Venture capital exits in domestic and cross-border investments," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 215-232.
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    6. 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.
    7. Wang, Lanfang & Wang, Susheng, 2012. "Economic freedom and cross-border venture capital performance," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 26-50.
    8. Lutz, Eva & Bender, Marko & Achleitner, Ann-Kristin & Kaserer, Christoph, 2013. "Importance of spatial proximity between venture capital investors and investees in Germany," Journal of Business Research, Elsevier, vol. 66(11), pages 2346-2354.
    9. Khavul, Susanna & Deeds, David, 2016. "The Evolution of Initial Co-investment Syndications in an Emerging Venture Capital Market," Journal of International Management, Elsevier, vol. 22(3), pages 280-293.
    10. Anita Quas & Diego D’Adda, 2018. "High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(3), pages 311-334, September.
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    12. Chortareas, Georgios E. & Girardone, Claudia & Ventouri, Alexia, 2013. "Financial freedom and bank efficiency: Evidence from the European Union," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1223-1231.

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