Cross-Border Venture Capital Investments in Asia: Selection and Performance
43 Pages Posted: 5 Oct 2010 Last revised: 10 May 2011
Date Written: December 8, 2010
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.
Keywords: Venture Capital; Internationalization; Proximity; Cultural Distance; Information Asymmetry; Partnership; Exit Performance
JEL Classification: G24, G32
Suggested Citation: Suggested Citation