Formal institutions, culture, and venture capital activity: A cross-country analysis |
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| Authors: | Yong Li Shaker A Zahra |
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| Institution: | a School of Management, State University of New York at Buffalo, 326 Jacobs Management Center, Amherst, NY 14260, USAb Department of Strategic Management and Organization & Gary S. Holmes Center for Entrepreneurial Studies Carlson School of Management, University of Minnesota, 321 19th Ave. South, Minneapolis MN 55455, USA |
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| Abstract: | Why does the level of venture capital activity vary across countries? This study suggests that the variation can be attributed to the different levels of formal institutional development. Further, this study proposes that venture capitalists respond differently to the incentives provided by formal institutions depending on different cultural settings. Analysis of VC activity for 68 countries during the 1996-2006 period shows that formal institutions have a positive effect on the level of venture capital activity, but this effect is weaker in more uncertainty-avoiding societies and in more collectivist societies. This study has useful theory and policy implications for venture capital and entrepreneurship development. |
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| Keywords: | Venture capital Institutions National culture Uncertainty avoidance Collectivism |
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