Cross-Border Venture Capital Investments in Asia: Selection and Performance
State University of New York at Albany - School of Business & Center for Institutional Investment Management
Santa Clara University
University of New Mexico
December 8, 2010
Journal of Business Venturing, Forthcoming
We investigate the investment behavior and exit performance of VCs that have pursued expansion outside their home locations, specifically, in Asia. Our findings indicate that, in the Asian VC markets, foreign VCs have relative advantages over local VCs in terms of size and experience while they are at a disadvantage in information collection and monitoring due to both geographic and cultural distances. When investing alone, foreign VCs are more likely to invest in more information-transparent ventures. Partnership with local VCs helps alleviate information asymmetry and monitoring problem and has positive implication for the exit performance of local entrepreneurial firms. Specifically, we find that after controlling for the endogeneity of selection, firms with both foreign and local VC partnership are about 5% more likely to successfully exit.
Number of Pages in PDF File: 43
Keywords: Venture Capital; Internationalization; Proximity; Cultural Distance; Information Asymmetry; Partnership; Exit Performance
JEL Classification: G24, G32Accepted Paper Series
Date posted: October 5, 2010 ; Last revised: May 10, 2011
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