Cross-Border Venture Capital Firms' Influence on the Foreign Market Entry Modes of High-Technology Ventures

Abstract

Today also small companies are actively internationalizing, which exposes them to the issues of how to internationalize and how to enter new markets. Both issues have been thoroughly researched, but not from the angle of cross-border VCs and their role in the decision-making process. My research problem is the question of how cross-border venture capitalists, in comparison to their domestic peers, affect the, foreign market entry modes of portfolio companies that start their operations in small and open economies. The main objective of this study is to present a model describing how, if at all, cross-border VCs influence foreign market entry decisions.

I summarize the prior research on entry mode decisions, models of internationalization and venture capitalists' post-investment activities and the findings suggest that cross-border VCs should significantly influence these entry mode decisions through their post-investment activities, both as board members and through the resources they provide to their ventures. All relevant findings are incorporated into a research framework describing how venture capitalists affect the foreign market entry modes.

I conduct a case study on the entry mode decisions of four cross-border VC-funded ventures in the empirical part of this study. Data was gathered through interviews with these ventures as well as with their domestic and cross-border VC investors. I analyze the data using my research framework and present my conclusions in the form of propositions, which are used to make improvements to the final model.

The major findings of my study are that cross-border VCs affect the foreign market entry modes of their ventures in several ways, the most important being which types of entry modes to use at the different stages of internationalization and which markets to target. I found differences in activity and value-added between VC firms but these differences could not be contributed to whether the VC firms were domestic or cross-border.

This study will hopefully aid ventures in their choice of VC investors, as this choice can significantly affect the internationalization process. The results of my study might also encourage researchers to take a closer look at this issue and test how my propositions hold up in large-scale testing, for other industries or ventures origination from other markets.