Venturing Abroad: The liability of foreignness on European venture capital investment returns
(2024) IBUH19 20241Department of Business Administration
- Abstract
- This study aims to investigate whether cultural, institutional, and geographic distances between European lead investors and startups affect returns to Venture Capital (VC) investments. A cross-sectional analysis of 332 European VC investments initiated in 2015 and 2016 within the European Union (EU), European Economic Area (EEA) and European Free Trade Association (EFTA) was conducted. Four different hypotheses were formulated and tested, of which two were supported. The results of this thesis finds that domestic investments have a higher mean return as compared to foreign investments. Solely cultural distance was found to be significant, with a negative effect on investment return. Decades of integration efforts between EU, EEA and EFTA... (More)
- This study aims to investigate whether cultural, institutional, and geographic distances between European lead investors and startups affect returns to Venture Capital (VC) investments. A cross-sectional analysis of 332 European VC investments initiated in 2015 and 2016 within the European Union (EU), European Economic Area (EEA) and European Free Trade Association (EFTA) was conducted. Four different hypotheses were formulated and tested, of which two were supported. The results of this thesis finds that domestic investments have a higher mean return as compared to foreign investments. Solely cultural distance was found to be significant, with a negative effect on investment return. Decades of integration efforts between EU, EEA and EFTA countries have been discussed as a potential factor contributing to the insignificance of institutional and geographic distances on investment return. However, the private nature of the venture capital industry has presented methodological challenges in this thesis, resulting in a non-random sampling approach. Therefore, caution should be taken in the generalisation of results to the broader population of VC investments. Future research ought to explore the possibility of obtaining a larger sample size to be able to make statistical inferences with high certainty on the relationships between the variables studied. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9163152
- author
- Claesson, Alexander LU ; Lee Alm, Daniel LU and Boras, Sara LU
- supervisor
- organization
- course
- IBUH19 20241
- year
- 2024
- type
- M2 - Bachelor Degree
- subject
- keywords
- venture capital, cross-border, cultural distance, institutional distance, geographic distance, lead investor
- language
- English
- id
- 9163152
- date added to LUP
- 2024-06-19 16:57:41
- date last changed
- 2024-06-19 16:57:41
@misc{9163152, abstract = {{This study aims to investigate whether cultural, institutional, and geographic distances between European lead investors and startups affect returns to Venture Capital (VC) investments. A cross-sectional analysis of 332 European VC investments initiated in 2015 and 2016 within the European Union (EU), European Economic Area (EEA) and European Free Trade Association (EFTA) was conducted. Four different hypotheses were formulated and tested, of which two were supported. The results of this thesis finds that domestic investments have a higher mean return as compared to foreign investments. Solely cultural distance was found to be significant, with a negative effect on investment return. Decades of integration efforts between EU, EEA and EFTA countries have been discussed as a potential factor contributing to the insignificance of institutional and geographic distances on investment return. However, the private nature of the venture capital industry has presented methodological challenges in this thesis, resulting in a non-random sampling approach. Therefore, caution should be taken in the generalisation of results to the broader population of VC investments. Future research ought to explore the possibility of obtaining a larger sample size to be able to make statistical inferences with high certainty on the relationships between the variables studied.}}, author = {{Claesson, Alexander and Lee Alm, Daniel and Boras, Sara}}, language = {{eng}}, note = {{Student Paper}}, title = {{Venturing Abroad: The liability of foreignness on European venture capital investment returns}}, year = {{2024}}, }