• Daniel Hain
Venture capital investments in innovative and knowledge based entrepreneurship have due to well known arguments such as the need of face-to-face contact to exchange tacit informations always been seem as a form of investment that requires spatial proximity. During the last decade this industrial paradigm changed in favor of a more globally distributed investment pattern. The cross border expansion of venture capital firms presents an interesting case of internationalization to study, because manifests not mainly through the establishment of foreign subsidiaries and branches but rather through the formation of international investment networks and alliances. Given the specific nature of venture capital investing, a new theoretical perspective is needed to understand the mechanisms of this new industrial paradigm of global investments. This thesis contributes to international business, finance and innovation system research by providing a novel theoretical framework to explain and analyze international investment activities and alliance formations in uncertain settings. By unifying theories of the resource-based view with trust, social capital and interaction theories, a comprehensive multidimensional analytical model is offered. Activities between two heterogeneous entities are explained on the one hand by social, organizational, institutional, and geographical proximity, on the other hand by differences in the resource-base, which mobilize opportunities through the combination of complementary assets.

To provide first empirical evidence, this study examines venture capital investment activities of 18 selected OECD countries during the 2000 – 2010 period. I observe the influence of social interaction, network formation, generalized trust, and similarities as well as differences in the institutional environment and sectoral specialization. This is done on domestic, bilateral and firm level. Major findings are the following. On country level, the demand for venture capital in terms of economic growth and activities associated with innovation as well as a high generalized trust facilitates the development of the domestic venture capital industry. On the bilateral level, venture capital shows a propensity to flow between countries with high geographic, social and institutional proximity but different configurations of the innovation system. Bilateral trust negatively influences investment activities between country pairs, indicating the mechanisms driving venture capital investments to substantially differs between domestic and international investments. This finding opens the discussion, if a domestic trust overload may lead to the exclusion of foreign investors. On firm level most important findings are that venture capitalists with a strong sectoral specialization show a higher propensity to invest

Overall, this thesis contributes to a better understanding of the complex macro- and socioeconomic dimensions influencing international investment activities and augment the existing analytical toolbox with a novel theoretical framework. From a broader perspective, this framework can, mutatis mutandis, also be used to explain cross-border economic exchange in general, if uncertainty, tacit knowledge and though the need for the formation of persistent relationships is involved.
Publication date29 Feb 2012
ID: 61458035