Institutional Distance and Cross-Border Venture Capital Investment Flows

Cross-border investments are an increasingly important part of venture capitalists' portfolios. In order to better understand venture capitalists' international investment decisions, we use dyadic pairings of European countries over a 10-year time span to examine how regulative, normative, and cultural-cognitive institutional differences are related to cross-border venture capital investment flows. Results demonstrate that increased normative and cultural-cognitive distance reduce cross-border investments, whereas regulative distance shows no relationship. Together, these findings suggest that institutional dimensions do influence venture capital investment decisions and that the type of distance can have differing effects.