Abstract
This study examines the country-level factors that affect U.S. venture capital firms' decisions to invest in foreign ventures. Foreign venture capital investment is driven by a combination of factors different than those accounting for either foreign direct or portfolio investment: the availability of innovative opportunities, the ability to commercialize these opportunities, and the extent to which the institutional infrastructure of each country enables the appropriation of returns. We report preliminary results using a sample of 350 U.S. venture capital firms potentially investing in 140 countries during the 1990-2002 period. Countries with more opportunities, as measured by the level of scientific knowledge, those with better commercialization institutions, as measured by capital market development, and those with lower levels of economic and political uncertainty are more likely to attract U.S. venture capital investments.
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