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Cross-Border Venture Capital Investments: What Is the Role of Public Policy?

Wendy A. Bradley (), Gilles Duruflé (), Thomas Hellmann () and Karen E. Wilson ()
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Wendy A. Bradley: Cox School of Business, Southern Methodist University, Dallas, TX 75275, USA
Gilles Duruflé: QCC Tech Innovation Platform, Montreal, QC H2V 3J7, Canada
Karen E. Wilson: OECD and GV Partners, 1207 Geneva, Switzerland

Journal of Risk and Financial Management, 2019, vol. 12, issue 3, 1-22

Abstract: (1) Background: Cross-border venture capital (VC) investments play an important role in the scaling up of high-growth companies. However, policymakers worry that foreign VC investments transfer the majority of economic activity to the investor country. On the one hand, start-ups welcome the foreign capital, expertise, and networks that accompany cross-border investments. On the other hand, policymakers are concerned that cross-border investments predominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem. This paper describes a framework for how policymakers can develop a set of policies toward cross-border VC investments. (2) Methods: The paper examines available data and trends about the role of cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains the underlying economic challenges and develops a policy framework. (3) Results: The analysis shows that in addition to policies that aim to attract foreign investors, there are also important policies for the development of the domestic VC market. The analysis encompasses policies that are both financial and non-financial in nature. (4) Conclusions: A core insight for policymakers is to retain a balance of initiatives, attracting foreign investors while simultaneously making sure to strengthen the country’s domestic VC industry and innovation ecosystem. The mix of policies will adjust as the domestic ecosystem matures.

Keywords: cross-border venture capital; internationalization; entrepreneurship policy; foreign venture capital firms; domestic entrepreneurs (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:3:p:112-:d:244825