Foreign Venture Capitalists and the Internationalization of Entrepreneurial Companies: Evidence from China

Abstract

We use a comprehensive database of venture-capital-backed companies from China to test whether and how foreign venture capitalists (VCs) can facilitate international initial public offerings (IPOs) of entrepreneurial companies. Foreign VCs increase the likelihood that a portfolio company lists on a foreign exchange and uses a top lawyer, banker, or accountant when doing so. The propensity to list overseas is moderated by the number of venture backers, the fund’s size, and governance in the domestic market. Foreign VCs encourage foreign-listings in domestic-backed companies. We take steps to address sample selection and endogeneity concerns. Overall, we show that foreign VCs encourage internationalization in entrepreneurial companies.

Keywords: venture capital, private equity, China, cross-border investment, internationalization, IPOs

JEL Classification: F36, G24, G34