Follow Me Going Out: Cross-Border Investment of Domestic Venture Capital and Overseas Listing of Portfolio Companies

This paper investigates the impact of cross-border investment of domestic venture firms (VCs) on the overseas listings of their domestic portfolio companies. Using a sample of 1,439 domestic VCs’ first-round domestic investment events collected by Crunchbase and PEDATA, we find that the more cross-border investment experience domestic VCs have, the more likely their domestic portfolio companies are to go public outside China. The findings remain robust after using the instrumental variable method to eliminate endogeneity, the Heckman two-stage regression method to eliminate sample selection bias, and the exclusion of a portion of the sample for reregression. In addition, we further find that foreign VCs participating in follow-on financing play a mediating role in the relationship between the cross-border investments of domestic VCs and the overseas listings of their portfolio companies. This paper reveals the critical path for domestic VCs to go out and bring in foreign VCs to promote overseas listings of domestic firms. The findings of this paper are critical to the layout of domestic VCs’ internationalization strategy and the sustainable development of domestic firms.