Cross-border Venture Capital Performance

This paper investigates the determinants of cross-border venture capital(VC) performance in the china market. The main purpose is to explore whether the localization experience is crucial cross-border venture capital performance. In this paper, we apply the most important indicators to measure the performance of venture capital performance: Internal Rate of Return(IRR). By sorting out 7685 venture capital case from 1985 to 2011, we collect 1852 exit case with available IRR data.First, to investigate the performance of the cross-border venture capital, we compare the IRR difference between the cross-border venture capital and local venture capital exit project, using T-test for statistical verification. Second, to investigate the determinants of cross-border venture capital performance. We focus on two major influencing factors by using Multiple linear regression model. The first is cross-border venture localization experience in Chinese market. The second is the investment behavior factors. Based on foreign venture capital’s human capital measure method by scholars study, we improved the method to measure localization experience cross-border venture capital in the Chinese market, which is divided into three measurable dimensions: the age of investment time in the Chinese market, local industry/sector experience, and local syndication network experience.The empirical results show that the more investments of cross-border venture capital firm involved in a certain industry / field, more local industry experience will be accumulated, then the greater probabillity of better the performance. Meanwhile, the scale of the investment, investment stage, investment cycle, exit ways and portfolio company’s location is the determinants of cross-border venture capital performance in the china market.