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Geographical and institutional distances in venture capital deals: How syndication and experience drive internationalization patterns

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  • Tykvová, Tereza
  • Schertler, Andrea

Abstract

Drawing on a novel dataset of worldwide venture capital deals, we investigate how venture capitalists (VCs) overcome the complexity of investing in geographically and institutionally distant regions. Our results indicate that syndicating with local VCs is a common way for foreign VCs to gain deal access, overcome the complexity of investing in distant regions and offset their lack of within-country experience. The foreign VC's distance from the portfolio company ceases to be a serious investment obstacle when he can rely on a highly experienced local VC. Our results further suggest that inexperienced VCs, i.e. those VCs with a large need for syndication, increase their chances to invest across borders when they invest in small deals jointly with local inexperienced partners.

Suggested Citation

  • Tykvová, Tereza & Schertler, Andrea, 2011. "Geographical and institutional distances in venture capital deals: How syndication and experience drive internationalization patterns," ZEW Discussion Papers 11-022, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:11022
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    References listed on IDEAS

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    1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    2. Shew-Jiuan Su & Steven Yen, 2000. "A censored system of cigarette and alcohol consumption," Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 729-737.
    3. repec:bla:jfinan:v:59:y:2004:i:4:p:1805-1844 is not listed on IDEAS
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    Cited by:

    1. Bryane Michael & Andy Chi-Lok Tai, 2023. "Does Asia’s Financial Intermediation of China’s Solar Industry during the 2020s Exhibit a “California Effect”?," Sustainability, MDPI, vol. 15(20), pages 1-21, October.
    2. Daniel Hain & Sofia Johan & Daojuan Wang, 2016. "Determinants of Cross-Border Venture Capital Investments in Emerging and Developed Economies: The Effects of Relational and Institutional Trust," Journal of Business Ethics, Springer, vol. 138(4), pages 743-764, November.
    3. Plagmann, Carolin & Lutz, Eva, 2019. "Beggars or choosers? Lead venture capitalists and the impact of reputation on syndicate partner selection in international settings," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 359-378.

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    More about this item

    Keywords

    Multiple Regression Analysis; Syndicates; Venture Capital; Internationalization; Distance; Experience;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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