International entrepreneurship, venture capital networks, and reinvestment decisions

Dmitry Khanin, Kristie Ogilvie, David Leibsohn

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Prior research has established that venture capitalists (VCs) may face significant obstacles in financing ventures from emerging or transition economies. Such hurdles are usually attributed to the weaknesses of host countries' institutional systems, especially regulatory. These institutional pitfalls may thwart VCs' ability to exit a portfolio company leading to lower returns than expected. Developing this approach, we argue that exit strategies may also be difficult to execute when VCs expand into advanced economies although for different reasons. Thus, we show that both necessity entrepreneurship prevalent in emerging economies and opportunity entrepreneurship prevalent in advanced economies are positively associated with the number of investment rounds received by portfolio companies. In contrast, we establish that VC firm capital and network density are negatively associated with the number of rounds provided to portfolio companies across distinct institutional environments. This suggests that VCs may improve their performance by choosing an appropriate strategy to navigate unfamiliar institutional environments to minimize their liability of foreignness. Finally, we find that the interaction of VC capital and network density is positively related to the number of VCs' investment rounds. Apparently, resource-rich VC firms may not fully realize the informational benefits of their dense "knowledge networks" due to insufficient collaboration with partners. At the same time, such VCs may no longer enjoy access to free information flows from prospective allies. Hence, network density and superior resources combined may lead to a greater number of investment rounds.

Original languageEnglish
Pages (from-to)1-24
Number of pages24
JournalJournal of International Entrepreneurship
Volume10
Issue number1
DOIs
Publication statusPublished - Mar 2012
Externally publishedYes

Fingerprint

Venture capital
Venture capitalists
International entrepreneurship
Emerging economies
Exit
Resources
Institutional environment
Entrepreneurship
Information flow
Venture capital financing
Knowledge networks
Liability of foreignness
Host country
Transition economies
Expected returns
Interaction

Keywords

  • Exit strategy
  • Knowledge networks
  • Necessity entrepreneurship
  • Network density
  • Opportunity entrepreneurship
  • Venture capital

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)

Cite this

International entrepreneurship, venture capital networks, and reinvestment decisions. / Khanin, Dmitry; Ogilvie, Kristie; Leibsohn, David.

In: Journal of International Entrepreneurship, Vol. 10, No. 1, 03.2012, p. 1-24.

Research output: Contribution to journalArticle

Khanin, Dmitry ; Ogilvie, Kristie ; Leibsohn, David. / International entrepreneurship, venture capital networks, and reinvestment decisions. In: Journal of International Entrepreneurship. 2012 ; Vol. 10, No. 1. pp. 1-24.
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