The 'Push' Factors of International Venture Capital

• Main Author: Thieme, Meredith
• Format: Others
• Published: Scholarship @ Claremont 2019
• Subjects: venture capital; international capital flows; macroeconomics; cross-border investments; VC; Economics; Finance; Growth and Development; International Economics; Macroeconomics
• Online Access: https://scholarship.claremont.edu/cmc_theses/2048; https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=3108&context=cmc_theses

Venture capital (VC), a historically American industry, has been in the process of globalizing in recent years. International venture capital flows (investing outside of one’s own country) have grown substantially over the past 30 years and even more dramatically in just the past decade. Previous research has mostly highlighted the determinants of where capital flows. However, research on the factors in a VC’s home country that affect investments abroad has been underdeveloped. To address this gap, this paper explores the impact of home country economic conditions on VCs’ propensity to invest abroad. I find that higher interest rates and economic wellbeing in a country (as measured by GDP growth and stock market capitalization to GDP) are associated with less deal flow abroad and, that higher foreign exchange rates are related to greater deal flow. I also note an interesting divergence in the role of these factors between VCs located in countries that exhibit different levels of international investing experience. My research indicates that VCs’ home country economic conditions do play a role in their decisions to invest abroad and suggests that these considerations may be different depending on the experience level of the VC industry in the firm’s country.