Individualism and Venture Capital: A Cross-Country Study
Management International Review, Forthcoming
50 Pages Posted: 17 Jun 2019 Last revised: 12 Jul 2019
Date Written: May 5, 2019
We investigate the effect of individualism – a dimension of culture that is strongly associated with entrepreneurship – on venture-capital investments using a large cross-country sample. Our sample consists of 1,496 country-year observations and includes 88 countries from 1998 to 2014. Controlling for economic conditions, the legal environment, and different aspects of culture, we find that individualism is positively and significantly related to venture-capital investments and explains 30% of cross-country variation. This result is stable across different subsamples, several measures of venture-capital investments, and even holds when using the political system 200 years ago as an instrument for individualism. The quality of formal institutions (rule of law) and entrepreneurial attitudes (uncertainty avoidance) partially mediate the effect of individualism on venture-capital investments, while economic conditions (GDP per capita) moderate this effect.
Keywords: Comparative Entrepreneurship, Cultural Values, Individualism, Institutions, Venture Capital
JEL Classification: G3, G24, G38, Z10
Suggested Citation: Suggested Citation