National Distances, International Experience, and Venture Capital Investment Performance

44 Pages Posted: 19 Aug 2013 Last revised: 23 Sep 2013

Yong Li

State University of New York at Buffalo

Ilan Vertinsky

University of British Columbia (UBC) - Sauder School of Business

Jing Li

Simon Fraser University

Date Written: August 18, 2013

Abstract

This study examines how the performance of cross-border venture capital investments is affected by national institutional and cultural distances between the environments of venture capitalists (VCs) and investee ventures. We propose that institutional and cultural distances will decrease VCs’ effectiveness in conducting venture capital activities and negatively affect investment performance in terms of exit success, and obtain supportive evidence while controlling for geographic distance. We further analyze how VCs can use their international experience to mitigate the negative consequences of national distances. We find that while broad international experience in diverse countries attenuates the deleterious effects of institutional distance in a significant way, it does not have a similar impact in attenuating the negative effects of cultural distance.

Keywords: venture capital, institutional distance, cultural distance, geographic distance, international experience, exit

Suggested Citation

Li, Yong and Vertinsky, Ilan and Li, Jing, National Distances, International Experience, and Venture Capital Investment Performance (August 18, 2013). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2311996 or http://dx.doi.org/10.2139/ssrn.2311996

Yong Li (Contact Author)

State University of New York at Buffalo ( email )

326 Jacobs Management Center
Amherst, NY 14260
United States

Ilan Vertinsky

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-9406 (Phone)
604-822-8477 (Fax)

Jing Li

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

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