Global Air Network and Cross-border Venture Capital Mobility

32 Pages Posted: 3 Dec 2019

See all articles by Siqi Zheng

Siqi Zheng

Massachusetts Institute of Technology (MIT) - Center for Real Estate; Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning; Hang Lung Center for Real Estate, Tsinghua University

Liaoliao Duan

Tsinghua University - Hang Lung Center for Real Estate

Weizeng Sun

Central University of Finance and Economics (CUFE) - School of Economics

Date Written: November 17, 2019

Abstract

Using 23-year panel data of cross-border venture capital investment and global air network expansion as a natural experiment, this paper investigates the effect of air travel on cross-border capital mobility. We find international airlines have a significant facilitating effect on venture capital mobility. Based on the difference-indifferences estimate, for our research period one additional flight per day leads to an increase in VC investment between the city pair by 0.14 deals on average per year (1.08 times the mean value). The heterogeneous analys indicates that, with more air connections, emerging industries and firms in earlier developmental stages receive more investment, and non-syndication investment increases more than syndication investment. In addition, we find the effect significantly increases with geographical distance: city pairs that are far away from each other experience a larger increase in VC flow after flight connections exist. Lastly, the evidence suggests that most of this increase in capital flows happens in wealthier cities. Connections between poor cities show little effect on VC flow. The paper presents evidence on the role of the global air network in reducing information transmission cost and raising the expectation for future growth potential. All results are shown to be robust using alternative VC investment measures and the regression discontinuity method.

Keywords: Venture capital, International flight, Capital mobility, Regression discontinuity

Suggested Citation

Zheng, Siqi and Duan, Liaoliao and Sun, Weizeng, Global Air Network and Cross-border Venture Capital Mobility (November 17, 2019). Available at SSRN: https://ssrn.com/abstract=3488724 or http://dx.doi.org/10.2139/ssrn.3488724

Siqi Zheng

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://https://siqizheng.mit.edu/

Liaoliao Duan

Tsinghua University - Hang Lung Center for Real Estate ( email )

HeShanHeng Building
Beijing, 100084
China

Weizeng Sun (Contact Author)

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing
China

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