International Allocation Determinants of Institutional Investments in Venture Capital and Private Equity Limited Partnerships

31 Pages Posted: 1 Apr 2007 Last revised: 28 Oct 2010

See all articles by Alexander Peter Groh

Alexander Peter Groh

EMLYON Business School

Heinrich Liechtenstein

University of Navarra - IESE Business School

Miguel Angel Canela

University of Barcelona - Faculty of Mathematics

Date Written: November 2007

Abstract

We examine the determinants of institutional investors when deciding about international capital allocation in Venture Capital and Private Equity Limited Partnerships through a questionnaire addressed to (potential) Limited Partners world-wide. The respondents provide information about their criteria for international asset allocation. The protection of property rights is the dominant concern, followed by the need to find local quality General Partners, and the quality of management and skills of local entrepreneurs. Furthermore, the expected deal flow plays an important role in the allocation process, while investors fear bribery and corruption. Public funding and subsidies do not at all play a role in the international allocation process. Hence, private money does not follow public money. The IPO activity and the size of local public equity markets are not as relevant as proposed by other researchers. Our results can support policymakers to increase the attractiveness of their countries for institutional investors and hence, to receive more risk capital for innovation, entrepreneurship, employment and growth.

Keywords: Venture Capital, Private Equity, CEE, International Asset Allocation, Institutional Investors

JEL Classification: G11, G23, G24

Suggested Citation

Groh, Alexander Peter and Liechtenstein, Heinrich and Canela, Miguel Angel, International Allocation Determinants of Institutional Investments in Venture Capital and Private Equity Limited Partnerships (November 2007). IESE Business School Working Paper No. 726. Available at SSRN: https://ssrn.com/abstract=977471 or http://dx.doi.org/10.2139/ssrn.977471

Alexander Peter Groh (Contact Author)

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Heinrich Liechtenstein

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Miguel Angel Canela

University of Barcelona - Faculty of Mathematics ( email )

Barcelona, 08007
Spain

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