Cross-Border Venture Capital Investments: What is the Role of Public Policy?

22 Pages Posted: 18 Jan 2019 Last revised: 12 Apr 2019

See all articles by Wendy A. Bradley

Wendy A. Bradley

Southern Methodist University (SMU) - Strategy & Entrepreneurship Department; Southern Methodist University (SMU) - Edwin L. Cox School of Business

Gilles Duruflé

Quebec City Conference

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School

Karen E. Wilson

Organization for Economic Co-Operation and Development (OECD)

Date Written: January 1, 2019

Abstract

Cross-border venture capital (VC) investments play an important role in the scaling up of high-growth companies. However, policymakers worry that foreign VC investments transfer the majority of economic activity to the investor country. On the one hand, startups welcome the foreign capital, expertise, and networks that accompany cross-border investments. On the other hand, policymakers are concerned that cross-border investments predominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem.

This paper describes a framework for how policymakers can develop a set of policies toward cross-border VC investments. The paper examines available data and trends about the role of cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains the underlying economic challenges and develops a policy framework. The analysis shows that in addition to policies that aim to attract foreign investors, there are also important policies for the development of the domestic VC market. The analysis encompasses policies that are both financial and non-financial in nature. A core insight for policymakers is to retain a balance of initiatives, attracting foreign investors while simultaneously making sure to strengthen the country’s domestic VC industry and innovation ecosystem. The mix of policies will adjust as the domestic ecosystem matures.

Keywords: Cross-border venture capital,internationalization,entrepreneurship policy,foreign venture capital firms,domestic entrepreneurs

JEL Classification: E61,G24,G18,L26,N20

Suggested Citation

Bradley, Wendy and Duruflé, Gilles and Hellmann, Thomas F. and Wilson, Karen E., Cross-Border Venture Capital Investments: What is the Role of Public Policy? (January 1, 2019). Saïd Business School WP 2019-02; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 591/2019; SMU Cox School of Business Research Paper No. 19-1. Available at SSRN: https://ssrn.com/abstract=3318250 or http://dx.doi.org/10.2139/ssrn.3318250

Wendy Bradley (Contact Author)

Southern Methodist University (SMU) - Strategy & Entrepreneurship Department ( email )

6212 Bishop Blvd.
Dallas, TX 75205
United States

HOME PAGE: http://https://www.smu.edu/cox/Our-People-and-Community/Faculty/Wendy-Bradley

Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )

P.O. Box 750333
Dallas, TX 75275-0333
United States

Gilles Duruflé

Quebec City Conference ( email )

2170 Dickson Street
Quebec City, Quebec
Canada

Thomas F. Hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

Karen E. Wilson

Organization for Economic Co-Operation and Development (OECD) ( email )

Paris
France

HOME PAGE: http://www.oecd.org

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