Subjective valuation of tangible and intangible heritage neighbourhood attributes

Abstract

Using 23-year panel data of cross-border venture capital investment and global air network expansion as a natural experiment, this paper investigates the effect of air travel on cross-border capital mobility. We find international airlines have a significant facilitating effect on venture capital mobility. Based on the difference-in-differences estimate, for our research period one additional flight per day leads to an increase in VC investment between the city pair by 0.14 deals on average per year (1.08 times the mean value). The heterogeneous analysis indicates that, with more air connections, emerging industries and firms in earlier developmental stages receive more investment, and non-syndication investment increases more than syndication investment. In addition, we find the effect significantly increases with geographical distance: city pairs that are far away from each other experience a larger increase in VC flow after flight connections exist. Lastly, the evidence suggests that most of this increase in capital flows happens in wealthier cities. Connections between poor cities show little effect on VC flow. The paper presents evidence on the role of the global air network in reducing information transmission cost and raising the expectation for future growth potential. All results are shown to be robust using alternative VC investment measures and the regression discontinuity method.