Abstract
Prior research suggests that market-supporting institutions are attractive to international venture capital (IVC), yet paradoxically VC firms increasingly invest in countries characterized by institutional weaknesses. In this study, we explore the institutional contexts that make countries attractive to IVC investment and favorable to IVC performance, thus illuminating the implied risk-reward tradeoffs in IVC firm location choice and ability to navigate institutional weaknesses. Utilizing fuzzy-set Qualitative Comparative Analysis (fsQCA), we find four distinct configurations of institutions associated with IVC attractiveness. Each configuration allows for some institutional weaknesses, enabling us to elaborate theory on institutional complementarities and substitutions that drive IVC investment. Further, we find that IVC firms have performed well even in countries with pervasive institutional weaknesses, suggesting that IVC firms may uniquely contribute to the success of new ventures in such institutional contexts. We discuss implications for theory and offer policy and managerial recommendations particularly relevant to IVC activity in the Asia-Pacific region.
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