Cross-Border Venture Capital Investments in Asia: Selection and Performance

43 Pages Posted: 5 Oct 2010 Last revised: 10 May 2011

Na Dai

State University of New York at Albany - School of Business & Center for Institutional Investment Management

Hoje Jo

Santa Clara University

Sul

University of New Mexico

Date Written: December 8, 2010

Abstract

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

Dai, Na and Jo, Hoje and Sul, Cross-Border Venture Capital Investments in Asia: Selection and Performance (December 8, 2010). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1687173

Na Dai (Contact Author)

State University of New York at Albany - School of Business & Center for Institutional Investment Management ( email )

1400 Washington Ave.
Albany, NY 12222
United States

Hoje Jo

Santa Clara University ( email )

Santa Clara, CA 95053
United States
408-224-8890 (Phone)
408-554-4029 (Fax)

Suleiman K. Kassicieh

University of New Mexico ( email )

MSC 05-3090
U of New Mexico
Albuquerque, NM 87131
United States

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