The role of domestic and cross-border venture capital investors in the growth of portfolio companies

This paper studies how the presence of cross-border as opposed to domestic venture capital investors is associated with the growth of portfolio companies. For this purpose, we use a longitudinal research design and track sales, total assets and payroll expenses in 761 European technology companies from the year of initial venture capital investment up to seven years thereafter. Findings demonstrate how companies initially backed by domestic venture capital investors exhibit higher growth in the short term compared to companies backed by cross-border investors. In the medium term, companies initially backed by cross-border venture capital investors exhibit higher growth compared to companies backed by domestic investors. Finally, companies that are initially funded by a syndicate comprising both domestic and cross-border venture capital investors exhibit the highest growth. Overall, this study provides a more fine-grained understanding of the role that domestic and cross-border venture capital investors can play as their portfolio companies grow and thereby require different resources or capabilities over time.     

Venture capital investing by information technology companies: Did it pay?

While corporate venture capital programs offer prospects for direct financial returns and strategic benefits, there is little evidence regarding whether they deliver economically significant value to sponsoring firms. We take an initial step in addressing this question by evaluating direct returns of programs of U.S. information technology companies during 1990–2002. Direct gains (losses) were widely dispersed and bimodally distributed, based on IRR and net cash flow metrics. Timing of initiation within the venture capital cycle; program scale; and annual investment, write-down, and harvest behavior were associated with differences in returns. We also explore how program characteristics may relate to their attractiveness as platforms from which to pursue strategic benefits.     

Outward foreign direct investment and green innovation in Chinese multinational companies

This paper investigates the reverse green innovation spillovers of outward foreign direct investment (OFDI) in Chinese multinational companies and how environmental regulation stringency in host countries moderates the relationship between OFDI and green innovation. The empirical analysis is based on an integrated dataset of publicly listed firms from 2008 to 2018. The findings demonstrate a significantly positive relationship between OFDI and the green innovation performance of multinational companies. It is also shown that environmental regulation stringency in host countries positively moderates the relationship between OFDI and green innovation. Further analysis reveals the variation of the findings across multinational companies in host countries at different development stages, with different ownership and in industries with different pollution intensities. The observations in this paper imply that the institutional environment of investment destinations matters for reverse technology spillovers, particularly reverse green technology spillovers from OFDI.     

Venture capital and high technology entrepreneurship

Venture capital clearly plays an important role in high technology entrepreneurship. The purpose of this article is to explain the differences among various venture capital complexes focusing on where venture capital is important to innovation and entrepreneurship and conversely where it is not. We do so through an empirical and historical examination of the seven most important venture capital complexes: California (San Francisco/ Silicon Valley), Massachusetts (Boston), New York, Illinois (Chicago), Texas, Connecticut, and Minnesota (Minneapolis).We establish a three-part tripartite typology for explaining the differences between these venture capital complexes: 1) technology-oriented complexes are located close to concentrations of high technology intensive businesses, invest most of their funds locally, and are net attractors of capital; 2) finance-oriented complexes are located around financial institutions and export their capital; and 3) hybrid complexes mix characteristics of both technology and finance-oriented venturing.Our findings have a series of important practical implications. Although venture capital is not absolutely necessary to facilitate high technology entepreneurship, well-developed venture capital networks provide tremendous incentives for entrepreneurship by lowering the difficulties of entering an industry. Venture capitalists use both their experience and their contacts to reduce many of the information and opportunity costs associated with new business formation. The importance of contact networks and information to both deal flow and investment monitoring goes a low way toward explaining why venture capitalists cluster tightly together. The availability of venture capital also attracts entrepreneurs and high quality personnel to a region creating a virtuous circle of new enterprise formation, innovation, and economic development.Private, nonprofit, and subsidized public efforts aimed at providing venture capital and stimulating high technology entrepreneurship must confront the fact that venture capital alone will not magically generate entrepreneurship and economic development. It is important that such efforts recognize the nonfinancial side of venture investing and attract experienced personnel who can tap into established entrepreneurial networks and secure coinvestors. More significantly, establishing public venture funding in an area lacking the requisite entrepreneurial climate or technology infrastructure may create a “catch 22” situation where locally oriented funds invest in bad deals or where venture capital is simply exported to established high technology regions.     

Opportunities and tripwires for foreign investors in Eastern Europe

This article discusses how the local environment influences the strategic decisions of foreign investors entering Central and Eastern Europe. The current economic transition of the region offers unique opportunities arising from virgin markets and low labor costs. Foreign businesses have been eager to exploit the former, often pursuing first-mover advantages. However, the underlying structural problems of the economies in transition inhibit the development of business: in adapting to the new market environment, firms are in a process of fundamental restructuring. Moreover, the privatization process in the region creates both opportunities and obstacles for entry by acquisition. While the institutional framework is developing toward Western models, it remains incomplete. © 1998 John Wiley & Sons, Inc.     

Implications of strategic alliances for earnings quality and capital market investors

Strategic alliances are well-established organizational forms and a means of strategy implementation. Despite their growing pervasiveness in the economy, existent literature provides few insights about earnings quality of strategic alliances. This challenge is especially severe in contractual alliances (CAs), where firms do not form a new corporate entity that is separate from the parent organization in comparison to joint ventures (JVs). We investigate how earnings attributes differ depending on involvement in strategic alliances of 8137 CAs and 3026 JVs spanning 1997–2007. We find, in particular, that earnings attributes of firms involved in contractual alliances are broadly reflective of low underlying accounting quality. Relative to JV firms and non-alliance (NA) firms, they have higher levels of discretionary accruals, lower accrual quality, and earnings that are less persistent, less smooth, less relevant, less timely, and less conservative. They also have lower earnings response coefficients.     

巴塞尔新资本协议下我国信托业全面风险管理思考

本文借鉴巴塞尔新资本协议下的全面风险管理理念,指出我国信托公司主动进行风险管理的必要性,并得出结论,提出我国信托公司进行全面风险管理的思路。     

Reassessing the relationships between private equity investors and their portfolio companies

The scope and purpose of this special issue is to reassess the relationships between private equity (PE) investors and their portfolio companies in the light of the need for venture capital/ private equity (VC/PE) firms to adapt their strategies for value creation in the light of the recent financial crisis. We particularly focus upon VC/PE characteristics that differently contribute to portfolio firm performance. The papers presented in this special issue capture this aim in various ways, reflecting the heterogeneity of VC/PE investors and the firms in which they invest. We begin this introductory paper by providing a brief overview of each paper’s contribution. We articulate themes for an agenda for future research relating to the heterogeneity of investor types and the contexts in which they invest.     

Why and how do foreign institutional investors outperform domestic investors in futures trading: Evidence from Taiwan

A unique data set containing all transactions from the Taiwan Futures Exchange allows us to dissect the long-lasting outperformance of foreign institutional investors in this emerging market. We show that foreign institutional investors comprehensively outperform domestic investors in trade directions, submission types, trading counterparties, order sizes, and order aggressiveness. Although submitting passive orders increases the trading profits of each investor group significantly, particularly for foreign institutions, the most passive domestic trades still lose to the most aggressive foreign institutional trades. We suggest that information advantage plays a more important role than order submission strategy in foreign institutional investors’ superior performance.     

Venture capital financing and the growth of startup firms

This study examines the association between the presence of venture capital (VC) and the employee growth of startups. Grounded in signaling theory, it investigates the impact, if any, of VC financing events upon the growth of these companies and whether the amount of funding affects the intensity of the signal. It further explores whether VC leads to growth or, alternatively, whether growth signals the need for VC. Finally, it documents the relationship between growth in startup financial valuation and changes in the number of employees over successive rounds of financing.     

Venture capital in Europe: social capital,formal institutions and mediation effects

Venture capital (VC) as an industry has existed for more than 50 years, yet it has only moderately developed beyond the USA despite numerous trials of governments to foster it. Vast research endeavors have been carried out to understand the antecedents, barriers, and facilitators of the industry. However, the focus has been rather limited and accounted almost exclusively for formal features of institutional environments, leaving the informal dimensions unexplored. This paper tries to close that gap. Based on longitudinal country-level data on 18 European countries, we first explore if the “usual suspects,” mostly embodied in reformable formal institutions, do play a role in the European context. We also investigate if informal institutions, and in particular social capital, may exert a prominent effect. In this respect, we found that the impact of social capital on VC activity is indeed indirect, through determining those structural formal institutions which in turn significantly affect VC activity. These findings contribute to the literature on VC and inform European policy makers on the most promising channels for creating a prosperous institutional environment for the financing of innovative start-ups.     

Export subsidies and foreign capital inflows

The welfare effect of a foreign capital inflow in an economy which practises an export-oriented trade policy is examined. The latter takes the form of optimally designed export subsidies, minimizing the welfare costs of existing import tariffs. Under the practice of this policy, an inflow of foreign capital is shown to have anambiguous welfare effect. An empirically relevant condition for welfare improvement is derived and discussed.     

Importance of spatial proximity between venture capital investors and investees in Germany

Based on 1182 dyads of venture capitalists and German portfolio companies involved in a financing round between 2002 and 2007, the study here examines the importance of spatial proximity between investors and investees in a dense economy. Analysis of this data shows that the probability of a financing relationship decreases by 8% if the journey time increases by one standard deviation. For deals involving very small or very large investment sums, and for less experienced venture capitalists and lead investors, spatial proximity is particularly important. The results suggest that even in economies with a dense infrastructure such as Germany spatial proximity between investor and investee impacts the likelihood of an investment.     

World market integration through the lens of foreign direct investors

This paper is motivated by the unparalleled increase in foreign direct investment to emerging market economies of the last 25 years. Using a large cross-country time-series data set, we evaluate the dependence of foreign direct investment on global factors, or worldwide sources of risk (i.e., factors that drive foreign direct investment across several countries). We construct a globalization measure that equals the share of explained variation in direct investment attributable to global factors. We show that our globalization measure has increased steadily for developing and developed countries. For the full sample of countries, the globalization measure rose by over 10-fold from 1985 to 1999. Furthermore, in recent years, developing countries' exposure to global factors has approached that of developed countries. Finally, our globalization measure correlates strongly with measures of capital market liberalization, supporting our hypothesis that increased market integration leads to a greater role for worldwide sources of risk. We discuss the implications of our results for public policies regarding capital market liberalization and policies directed at attracting foreign investment.     

Nascent ventures competing for start-up capital: Matching reputations and investors

Although nascent ventures have not yet developed a performance-based reputation, the individual reputations of their founders, based on the performance of their earlier ventures, can function as important signals to investors. Selection system theory distinguishes between different types of reputations as well as different types of investors, in order to analyze how particular types of reputations affect the investment behavior of particular types of investors. The empirical setting of this paper is the Dutch film industry, in which we study the impact of different types of reputations of producers and directors on the investment decisions of the three main investors.     

Ownership dispersion and listing rules in companies large and small: A reply

The contrast between the findings of the present authors and Cheffins, Chambers and Koustas is explained by their addressing different sizes of firms. Chandler's view of the relative incidence of the divorce of ownership from control among large firms remains unsupported by any quantitative evidence.     

我国证券公司净资本监管效应实证分析

本文以 2002 年以来 31 家证券公司的年报数据为样本,界定证券业净资本监管的主要影响因素,通过联立方程、三阶段最小二乘法进行的截面数据实证分析,研究我国证券公司的净资本监管效应.     

The complementarity of human capital and language capital in foreign direct investment

Integrating the literature on language-MNEs (multinational enterprises) in international business and economic theory of human capital (HC), we establish an analytical framework to systematically examine how HC and language capital (LC) jointly determine foreign direct investment (FDI). We contend that the extent to which MNEs can leverage HC in a host country for FDI depends on LC. Based on an extensive bilateral dataset covering 3315 country pairs during 1995–2008, we reveal clear evidence on the moderating role played by LC in HC-FDI relationship and such evidence is robust to different measures used for different variables, the inclusion of more control variables and different samples.