• Do institutions help venture capitalists trust new partners? Evidence from cross-border venture capital syndicates

      Meuleman, Miguel; Jääskeläinen, Mikko; Maula, Markku; Wright, Mike (2011)
      Venture capital (VC) has become an increasingly international phenomenon but there is a dearth of research that looks at the process by which VC firms co-invest across borders. We aim to fill this gap by examining drivers of cross-border partner selection decisions with a particular focus on the impact of experience-based trust on cross-border partner selection decisions in VC syndicates. Further, we examine how this relationship is moderated by different aspects of the institutional environment. We analyze these issues by studying the selection of foreign VC firms by local VC firms in cross-border VC syndicates in Europe over the period 1997 to 2008. The total sample consists of 1021 VC investments in which 391 different local VC investors invited 302 different foreign investors. Our results indicate that the effect of experience-based trust on partner selection is negatively moderated by the extent of generalized trust and the level of legal protection offered by the host country. The effect of experience-based trust on partner selection decisions is positively moderated by the level of cultural distance between the host country and the country of the foreign partner. Implications for theory and practice are suggested.
    • Venturing into the unknown with strangers: Substitutes of relational embeddedness in cross-border partner selection in venture capital syndicates

      Meuleman, Miguel; Jääskeläinen, Mikko; Maula, Markku V.J.; Wright, Mike (Journal of Business Venturing, 2017)
      Syndicating with prior partners through relationally embedded ties may be widespread, but not always optimal when investing across borders especially if few prior partners operate in the focal market. However, the substitutes of relational embeddedness for trust creation in cross-border partner selection are poorly understood. We develop and test a model of how relational embeddedness interacts with structural embeddedness and legal and normative institutions and how relational embeddedness and these three substitutes jointly affect cross-border partner selection in venture capital syndicates. We test the hypotheses in the context of cross-border venture capital syndication in 12 European countries. Our findings based on a case-control analysis suggest that although relational embeddedness is a key driver of future partnering, structural embeddedness and trust generating institutions such as high quality legal frameworks and industry associations facilitate cross-border partnering and diminish the need to rely on relationally embedded ties in cross-border partner selection.