Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments
40 Pages Posted: 25 Feb 2019
Date Written: February 8, 2019
Cross-border venture capital investments are inherently uncertain and risky, and VC firms vary significantly in how much and where they make such investments. We propose a mechanism to explain such variation: investing in startups founded by immigrants provides VCs with knowledge and connections that facilitate subsequent investments in startups from the immigrants’ home country. Empirically, we find that U.S. VCs that invest in Indian immigrant entrepreneurs in the U.S. subsequently invest more in India — in the exact region where the immigrants are from and with a lower likelihood of using a local co-investor. These effects are stronger for VCs with ethnic Indian partners. We find no such effects from investing in ethnic (non-immigrant) Indian entrepreneurs, who lack direct knowledge and connections in India.
Keywords: Immigration, Venture Capital, Foreign Investment, Entrepreneurship, Cross-Border Knowledge Transfer, Global Networks
JEL Classification: F21, F22, F23, M16
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