An increasingly global venture capital (VC) business raises the question whether foreign VCs’ investments pull economic activity away from domestic economies. Using a large sample of VC-backed European ventures, we analyze whether involvement of foreign VCs influences firms’ and entrepreneurs’ migration patterns. We provide evidence that foreign investors, in particular from the U.S., on average, back much better European ventures and increase the likelihood of foreign exits and emigration of entrepreneurs. These effects are robust to endogenous selection. Our findings suggest that VC firms are a funnel through which high-impact economic actors are absorbed by countries with foreign VC presence. Governmental efforts to increase domestic supply of VC should have a positive impact on domestic economies.
Technische Universität München (TUM) - TUM School of Management; Center for Entrepreneurial and Financial Studies
Technische Universität München (TUM) - TUM School of Management
Technische Universität München - Center for Entrepreneurial and Financial Studies