Success in Global Venture Capital Investing: Do Institutional and Cultural Differences Matter?

47 Pages Posted: 15 Jan 2013 Last revised: 7 Jul 2015

See all articles by Rajarishi Nahata

Rajarishi Nahata

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Sonali Hazarika

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York

Kishore Tandon

CUNY Baruch College - Zicklin School of Business

Date Written: 2013

Abstract

We analyze the impact of institutional and cultural differences on success in global venture capital (VC) investing. In both developed and emerging economies, superior legal rights (and enforcement) and better-developed stock markets significantly enhance VC performance. Remarkably, cultural distance between countries of the portfolio company and its lead investor positively affects VC success. Further analysis reveals that cultural differences create incentives for rigorous ex-ante screening, improving VC performance. Finally, local VC participation enhances success and mitigates foreign VCs’ liability of foreignness, albeit only in developed economies. Our findings follow from analyzing VC investments in nearly 10,000 companies across 30 countries.

Suggested Citation

Nahata, Rajarishi and Hazarika, Sonali and Tandon, Kishore, Success in Global Venture Capital Investing: Do Institutional and Cultural Differences Matter? (2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2200737

Rajarishi Nahata (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Sonali Hazarika

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York ( email )

17 Lexington Avenue
New York, NY 10010
United States

HOME PAGE: http://https://zicklin.baruch.cuny.edu/faculty-profile/sonali-hazarika/

Kishore Tandon

CUNY Baruch College - Zicklin School of Business ( email )

55 Lexington Avenue
New York, NY 10010
United States
(646) 312-3468 (Phone)
(646) 312-3451 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
410
Abstract Views
1,946
rank
89,580
PlumX Metrics