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How Do Local Venture Capital Firms Benefit from Cross-Border Syndications with Foreign Partners?

This paper examines the benefits to local venture capital (VC) firms of syndicating with foreign partners. We find that post-syndication, local VC firms change their investment behavior from investing in low risky sectors to high risky sectors. Further, a larger number of their portfolio companies are successfully exited, suggesting improved performance. We conjecture that this outcome is due to learning effects between local and foreign VC firms. We find that the learning process for local VC firms is substantial when their foreign partner is either a North American or European VC firm. Our results show that the benefits of cross-border VC syndications between local and foreign VC firms are mutual.