In the period 2000-2008, more than one third of venture capital-backed companies worldwide received financing from venture capitalists that were not located in the same country as these companies. This paper offers a comprehensive description of how microeconomic as well as macroeconomic factors, which likely affect the availability and profitability of investment opportunities at home and abroad, influence the internationalization patterns. To carry out this comprehensive description, we study the effects these factors have on internationalization patterns from four different perspectives. First, from the perspective of a venture capitalist we analyze its cross-border and domestic deals. Second, from the perspective of the portfolio company we investigate the likelihood that a foreign venture capitalist participates in a particular deal. Third, from the perspective of the portfolio companies’ country we examine the number of cross-border deals in this country. Fourth, in a bilateral country setting, in which we combine the macroeconomic factors of the venture capitalists’ and the portfolio companies’ countries, we focus on the number of cross-border venture capital deals between these two countries. Our 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.

Schertler, Andrea and Tereza Tykvova (2009), Venture Capital and Internationalization, ZEW Discussion Paper No. 09-055, Mannheim. Download


Venture capital, Internationalization, Macroeconomic factors.