Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments

40 Pages Posted: 25 Feb 2019

See all articles by Sarath Balachandran

Sarath Balachandran

Independent

Exequiel Hernandez

University of Pennsylvania - The Wharton School

Date Written: February 8, 2019

Abstract

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

Suggested Citation

Balachandran, Sarath and Hernandez, Exequiel, Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments (February 8, 2019). Available at SSRN: https://ssrn.com/abstract=3331264 or http://dx.doi.org/10.2139/ssrn.3331264

Sarath Balachandran

Independent ( email )

No Address Available

Exequiel Hernandez (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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