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International allocation determinants of institutional investments in venture capital and private equity limited partnerships

Author

Listed:
  • Groh, Alexander P.

    (Montpellier Business School)

  • Liechtenstein, Heinrich

    (IESE Business School)

  • Canela, Miguel A.

    (University of Barcelona)

Abstract

We examine the determinants of institutional investors when deciding on international capital allocation in Venture Capital and Private Equity Limited Partnerships; this is done through a questionnaire addressed to (potential) Limited Partners world-wide. The respondents provide information about their criteria for international asset allocation. The protection of property rights is the dominant concern, followed by the need to find local quality General Partners, and the quality of management and skills of local entrepreneurs. Furthermore, the expected deal flow plays an important role in the allocation process, while investors fear bribery and corruption. Public funding and subsidies do not play a role at all in the international allocation process. Hence, private money does not follow public money. The IPO activity and the size of local public equity markets are not as relevant as proposed by other researchers. Our results can support policymakers to increase the attractiveness of their countries for institutional investors and, thus, to receive more risk capital for innovation, entrepreneurship, employment and growth.

Suggested Citation

  • Groh, Alexander P. & Liechtenstein, Heinrich & Canela, Miguel A., 2008. "International allocation determinants of institutional investments in venture capital and private equity limited partnerships," IESE Research Papers D/726, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0726
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    Cited by:

    1. Groh, Alexander P. & Liectenstein, Heinrich, 2009. "The first step of the capital flow from institutions to entrepreneurs: The criteria for sorting venture capital funds," IESE Research Papers D/795, IESE Business School.
    2. Taoufik A. Taleb & Abdessadeq Sadqi, 2020. "Inquiry Into the Moroccan Private Equity Industry: A Proposal of an Adapted Value Creation Framework," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(2), pages 1-13, April.
    3. Groh, Alexander Peter & von Liechtenstein, Heinrich, 2009. "How attractive is central Eastern Europe for risk capital investors?," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 625-647, June.
    4. Wendy A. Bradley & Gilles Duruflé & Thomas F. Hellmann & Karen E. Wilson, 2019. "Cross-Border Venture Capital Investments: What Is the Role of Public Policy?," JRFM, MDPI, vol. 12(3), pages 1-22, July.

    More about this item

    Keywords

    Venture Capital; Private Equity; International Asset Allocation; Institutional Investors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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