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International Analysis of Venture Capital Programs of Large Corporations and Financial Institutions


  • The authors appreciate the help of Georges Noel and Thomas Meyer from the European Private Equity and Venture Capital Association (EVCA) for insightful discussions as well as seminar and conference participants at the Louvain School of Management (CRECIS and CESAM), the University of Maastricht, the RENT XXIV Conference in Maastricht, the European Summer University Conference on Entrepreneurship 2010 in Tartu, the Annual Conference of the French Finance Association (AFFI) in Lyon, the MOVE Conference on “Venture Capital” in Barcelona, the International Conference on the Dynamics of Entrepreneurship at ZEW Mannheim, and the 2012 FMA Annual Conference in Atlanta. The authors also thank the Solvay Group for its support throughout this research project and Sofia Johan, Ulrich Hege, Marco Da Rin, Ines Macho-Stadler, David Perez-Castrillo, three anonymous referees, and Douglas Cumming (the editor) for insightful comments on previous versions of this manuscript.


In this article, we investigate what drives large companies (nonfinancial corporations and financial institutions) worldwide to run venture capital (VC) programs, specifically targeting Fortune Global 500 companies. Such a decision involves trade-offs between expected strategic and financial benefits and costs of managing and financing a portfolio of ventures, which are influenced by the institutions and regulations that affect innovation-oriented entrepreneurship. We determine that companies are more likely to run a program if they are based in countries in which the market for early-stage investments is well developed and innovation-related resources are more widely available. Moreover, companies based in countries with costly personal bankruptcy regulations are less likely to run a VC program, which is consistent with the prediction that these regulations discourage entrepreneurial initiatives. These findings emphasize the importance of favorable local conditions for an affiliated VC program. We observe no evidence, however, that unfavorable local conditions affect the degree of internationalization of programs, suggesting that running international programs entails significant extra costs. Finally, no significant difference emerges between U.S.-based and Western European-based companies.