Venture capital and internationalization

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp09055.pdf countries, we focus on the number of cross-border venture capital deals between these two countries. Non-technical summaryOur analyses from these four different perspectives provide a core understanding of the factors that drive internationalization within venture capital industries from different angles. To fulfill this task,we use a new dataset on worldwide venture capital investments.The key results from our four perspective analysis can be summarized as follows: domestically experienced venture capitalists seem to be able to exploit the advantages from internationalization more effectively than their less experienced counterparts. Foreign venture capitalists are more likely to participate in larger deals, especially when the portfolio company is located in a small country.Another finding is that companies from the IT, machinery, and biotech sectors are more likely to be financed by foreign venture capitalists than companies in other industries. Internationalization patterns are shaped not only by the characteristics of the venture capitalist, the portfolio company and the deal, but also by macroeconomic factors. Countries with higher expected economic growth, in which more promising investment opportunities for venture capitalists are likely to be generated, stimulate venture capital activity from domestic as well as foreign venture capitalists. A higher stock market capitalization encourages domestic venture capitalists to invest more both at home and abroad. Das Wichtigste in Kürze

Geographical and Institutional Distances in Venture Capital Deals: How Syndication and Experience Drive Internationalization Patterns

“…While no evidence exists that VCs' cross-border deals offer higher expected returns than their local deals, findings from recent empirical studies suggest that return differences spur cross-border deals. These studies document that worldwide venture capital flows between the VC and PC countries respond positively to the expected growth in the PC country and negatively to that in the VC country (Schertler and Tykvová 2011). Moreover, countries with developed national systems of innovation, which generate more promising investment opportunities, attract larger cross-border venture capital flows than countries with less developed national systems of innovation.…”

“…More specifically, U.S. VCs invest into countries with a higher patenting activity Guillén 2010a, 2010b), and VCs located worldwide target countries with more university students (Aizenman and Kendall 2008) and higher business R&D expenditures (Schertler and Tykvová 2011). Finally, countries with more viable financial markets, which promise better exit possibilities and therefore better return opportunities (Black and Gilson 1998), attract larger cross-border venture capital inflows than countries with poor financial markets (Guler and Guillén 2010a, 2010b, Aizenman and Kendall 2008, Schertler and Tykvová 2011. These findings indicate that VCs cross borders when they expect higher returns abroad than at home.…”

“…Besides our central independent variables of interest related to the geographical and institutional distances between the VC and PC country (log geographical distance, same law, legal distance, cultural distance), we add variables that the emerging literature on VC internationalization identifies as important (Guller and Guillén 2010aand 2010b, Aizenman and Kendall 2008, Iriyama and Madhavan 2010, Schertler and Tykvová 2011. More specifically, we investigate how the availability of profitable investment opportunities, national systems of innovation, financial markets, legal institutions pertinent to venture capital activity as well as size of the local VC industries in the VC and PC country affect cross-border venture capital deals.…”

The role of venture capital in the development of the SME sector

“…Studies have shown that venture capitalists mostly invest in small countries in which some renowned companies are founded. These funds invest more in companies dealing with IT, mechanical engineering and biotechnology than in other industries (Schertler & Tykvová, 2009). There are about 800 venture capital funds in the US.…”

Venture Capital Best Practice Strategies To Reduce Economic Uncertainty In Biofuel Investing

“…The literature is replete with strategies to reduce asymmetry of information vis-à-vis portfolio firm by utilizing staging, due diligence, and monitoring portfolio firm performance (Schertler & Tykvova, 2011;Wiltbank, 2005;Zhang, 2011).…”