Syndication and Foreignness: Venture Capital Investments in Emerging and Developed Markets |
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| Affiliation: | 1. Hohenheim University, Chair of Corporate Finance, Wollgrasweg 49, 70599 Stuttgart, Germany;2. ZEW Mannheim, Department of International Finance and Financial Management, Germany;3. Leuphana University, Nord/LB Chair of Integrated Financial Risk Management, Scharnhorststr. 1, 21335 Lüneburg, Germany;4. University of Groningen, Faculty of Economics and Business, The Netherlands;1. Fulton Hall 336, Carroll School of Management, Boston College, Chestnut Hill, MA 02467, United States;2. College of Management, University of Massachusetts Boston, MA 02125, United States;3. 414C Hayden Hall, D''Amore-McKim of Business, Northeastern University, Boston, MA 02115, United States;1. Shanghai University of Finance and Economics, China;2. Hong Kong University of Science and Technology, China;1. EMLYON Business School, Research Centre for Entrepreneurial Finance, 23 Avenue Guy de Collongue, 69134, Ecully, France;2. University of Lyon 3, 1 rue de Université, 69007, Lyon, France;1. School of Management, State University of New York at Buffalo, 326 Jacobs Management Center, Amherst, NY 14260, USA;2. Sauder School of Business, The University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada;3. Beedie School of Business, Simon Fraser University, 8888 University Drive, Burnaby, BC V5A 1S6, Canada |
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| Abstract: | This paper aims to understand when foreign and domestic firms have different likelihoods of syndication in venture capital investments. Although current theory may imply that foreign firms face the liability of foreignness that constrain their syndication opportunities, empirical studies provide quite mixed evidence. To address this issue, this study emphasizes the contingency roles of settings, experience, and reputation. In particular, I argue that foreign firms are more likely to syndicate, compared with domestic ones, when focal investments are less mature, or when local markets are colder and less capitalized. However, the difference in syndication between foreign and domestic firms decreases when they accumulate more experience or when they acquire higher reputation. I find empirical evidence from a sample of venture capital investments in China, UK, and the Netherlands. Theoretical and practical implications are discussed at the end. |
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