Determinants of Cross-Border Venture Capital Investments in Emerging and Developed Economies: The Effects of Relational and Institutional Trust

Daniel Hain, Sofia Johan, Daojuan Wang

Research output: Contribution to journalArticlepeer-review

66 Citations (Scopus)
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Abstract

Frequent and open interaction between venture capitalists (VCs) and entrepreneurs is necessary for venture capital investments to occur. Increasingly, these investments are made across jurisdictions. The vast majority of these cross-border investments are carried out in a syndicate of two or more VCs, indicating the effects of intraindustry networks needing further analysis. Using China as a model, we provide a novel multidimensional framework to explain cross-border investments in innovative ventures across developed and emerging economies. By analyzing a unique international dataset, we examine worldwide venture capital investment flows from 2000–2012 and consider the effects of geographical, cultural, and institutional proximity as well as institutional and relational trust. We find trust to mitigate the negative effects of geographical
and cultural distance, where institutional trust is more relevant for investments in emerging economies, and relational trust is more relevant for investments in developed economies.
Original languageEnglish
Pages (from-to)743-764
Number of pages22
JournalJournal of Business Ethics
Volume138
Early online date4 Aug 2015
DOIs
Publication statusPublished - 2016

Bibliographical note

Acknowledgments
We would like to thank Bengt-Åke Lundvall, Jesper Lindgaard Christensen, Andreas Pyka, Tereza Tykvová, Mike Wright, Volker Seiler, Douglas Cumming, Wenxuan Hou, Edward Lee, two anonymous referees, and all participants of the JBE Special Issue Tibet Conference 2014, the Stanford Scancor Seminar Series 2014, the IKE Research Seminar Series 2013, and the UK IRC Cambridge Young Scholar Workshop 2012 for invaluable insight, comments, inspiration, and feedback. All opinions and errors remain our own.

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