Cross-Border Venture Capital Flows and Local Ties: Evidence from Developed Countries

The Quarterly Review of Economics and Finance, 51; pp. 36-48, 2011

Posted: 9 Nov 2013

See all articles by Tereza Tykvova

Tereza Tykvova

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Andrea Schertler

Leuphana University of Lueneburg

Date Written: 2011

Abstract

Using a unique global dataset from developed countries, this paper provides evidence that not only traditional determinants of international capital flows affect cross-border venture capital flows, but that ties among local venture capital investors are related to size and style of these flows. Our results on size indicate that both number and value of cross-border flows between two countries increase with tie intensities within the local venture capital industries in both countries. Our results on style suggest that strong local ties go hand in hand with more intensive ties to foreign investors. Thus, rather than protecting the local market and fending off competition from foreign investors, local tie intensity seems to stimulate international syndication and expansion of venture capital financing across borders, which allows venture capital investors to build geographically diversified portfolios and to add value by building cross-border syndicates. These effects seem to be stronger for those foreign investors who already have experience in the particular destination country.

Keywords: Venture capital, Internationalization, Syndication, Ties

JEL Classification: F21, G24

Suggested Citation

Tykvova, Tereza and Schertler, Andrea, Cross-Border Venture Capital Flows and Local Ties: Evidence from Developed Countries (2011). The Quarterly Review of Economics and Finance, 51; pp. 36-48, 2011, Available at SSRN: https://ssrn.com/abstract=2351753

Tereza Tykvova (Contact Author)

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Germany

Andrea Schertler

Leuphana University of Lueneburg ( email )

Scharnhorststrasse 1
L√ľneburg, 21314
Germany

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