Understanding the Internationalization of the US Venture Capital Industry: The Role of Experience, Reputation, and Networks

Abstract

The development of breakthrough innovation in new nations, the emergence of entrepreneurial talent to new regional clusters, and the attendant need to participate in emerging growth markets have encouraged venture capital firms to develop global strategies and make offshore investments. While a growing collection of studies document the globalization of venture capital investment and its impact on portfolio firms, we know surprisingly little about the internationalization processes of venture capital firms themselves or the consequences for performance. This study departs from the conventional emphasis on venture capital as an inherently local business and draws upon the resource-based view and the capabilities literature to explain why some venture capital firms internationalize and others do not. We develop and test propositions using panel data over a twenty-eight year period containing 21,604 rounds of venture capital financing. Our results showcase the subtle interplay between venture capital firm experience, reputation, and network quality in the global market for the financing of high-growth new ventures.