Influences of Foreign and Domestic Venture Capitalists on Internationalisation of Small Firms

Abstract

This study investigates whether venture capitalists (VCs) influence the internationalization of small firms and whether such impact differs between foreign and domestic VCs. Our findings, based on in-depth interviews with top decision-makers from two VCs and four portfolio ventures, indicate contrasts between the perceptions of VCs and portfolio firms, so that the former claim to have a higher impact than what is perceived by the latter. Additionally, our evidence about the differential impacts of foreign versus domestic VCs runs counter to the literature and suggests that the purported stronger impact of foreign VCs may have been over-emphasized in the literature. Two contingencies are revealed that seem to affect the impact of the VC and of its nationality on the internationalization of investee firms: breadth of the industry (global versus local industries) and firm's vocation (born global firm versus local leader).

How much is new in Brouthers et al.’s new foreign entry modes, and do they challenge the transaction cost theory of entry mode choice?

“…Foreign investment by VC firms is not particularly novel, and is well explained by the TCT of entry modes. VC firms provide finance -as well as management skills and legitimacy -to the firms in which they take a stake; they enter the markets in which there is a demand for what they have to offer, subject to the wellknown limitations imposed by the liability of foreignness (Carneiro, Moreira, & Sheng, 2022;Guler & Guillen, 2010). The logic of their foreign entry is similar to that of banks, consulting firms, and other service providers.…”