Going Abroad, Friends on Board: Cross-Border Venture Capital and Syndication

Abstract

Cross-border venture capitals (CBVCs) are increasingly prevailing in recent decades, especially in emerging markets like China. With foreignness growing, it turns from liability into advantage in the context of CBVCs. We investigate the VC firm’s syndication when faced with foreignness caused by culture differences. We find an inverse U-shape relationship between foreignness and syndication, with the firm’s reputation as moderator. Apart from syndication, foreign firms establish a local subsidiary when faced with foreignness.

Keywords: cross-border venture capital, syndication, liability of foreignness, reputation, subsidiary

JEL Classification: G24