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Cross-border venture capital investments: The impact of foreignness on returns

Axel Buchner, Susanne Espenlaub, Arif Khurshed and Abdulkadir Mohamed ()
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Axel Buchner: University of Passau
Susanne Espenlaub: University of Manchester
Arif Khurshed: University of Manchester
Abdulkadir Mohamed: Cranfield School of Management

Journal of International Business Studies, 2018, vol. 49, issue 5, 575-604

Abstract: Abstract Against the background of the growing internationalization of venture capital (VC) investing, this is the first global comparison of the returns generated by individual domestic and cross-border deals. We examine investments worldwide during 1971–2009 and find that cross-border investments significantly underperform compared with equivalent domestic investments. Returns are negatively affected by geographic distances, cultural disparities, and institutional differences between the home and host countries. Returns on cross-border and domestic deals also decline after the late 1990s. International portfolio diversification and the saturation of domestic markets may explain why VC investors make cross-border investments despite poor expected returns.

Keywords: venture capital; cross-border; return; IRR; PME; foreignness; distance (search for similar items in EconPapers)
Date: 2018
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