Does Syndication with Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?

Journal of International Management 20, 406-420.

Posted: 14 Jun 2018

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: 2014

Abstract

Venture capitalists (VCs) face additional risks and costs when they invest in firms located in geographically remote countries or in countries whose institutions differ substantially from those in their home countries. Our study considers foreign VCs' prospect of overcoming these investment obstacles as a rationale for syndicating with local VCs from the investment countries. Through such syndication, foreign VCs may obtain easier access to investment opportunities, improve the risk allocation and face lower information costs. Using a novel dataset of worldwide deals, we draw a diametrically opposed picture for the two kinds of distance: our results lend support to the conjecture that the obstacles of great institutional distance cannot be overcome with the help of a local VC, whereas those of great geographical distance can.

Keywords: Venture capital, Internationalization, Syndication rationale, Geographical and institutional distance, Moderating effect

JEL Classification: F21, G24

Suggested Citation

Tykvova, Tereza and Schertler, Andrea, Does Syndication with Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance? (2014). Journal of International Management 20, 406-420., Available at SSRN: https://ssrn.com/abstract=3138738

Tereza Tykvova (Contact Author)

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

Germany

Andrea Schertler

Leuphana University of Lueneburg ( email )

Scharnhorststrasse 1
Lüneburg, 21314
Germany

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