Does Property Appropriation Hazard Matter in Cross-border Venture Capital Syndication?

Abstract

Extant research demonstrates that property appropriation hazard may play a crucial role in shaping the international expansion mode of emerging market enterprises, but many of its implications are yet to be discussed thoroughly, for instance, the contexts and mechanisms that property appropriation hazard affect the strategies of emerging market venture capital (VC) firms. In this study, we examine the effect of property appropriation hazard on cross-border transactions, focusing on the syndication choice of cross-border VC investments. Utilizing in-depth data concerned with specific cross-border VC deals, this study suggests as the property appropriation hazard of home market increases, the VCs from emerging markets are more likely to syndicate with local VCs in host market. Furthermore, Bilateral investment treaties between home market and host market of the VCs can negatively moderate the positive relationship between property appropriation hazard and local VC participation. At firm level, we find bank affiliation has negative moderating effects on the positive relationship between property appropriation hazard and local VC participation. While considering the role of prior local experience of the VC form emerging markets, we find the moderating effect of prior host market successful exit experience on the relationship between property appropriation hazard and local VC participation shows no significant results.