Mi Casa Es Tu Casa: Immigrant Entrepreneurs as Pathways to Foreign Venture Capital Investments
Abstract
Venture Capital Firms are increasingly investing outside their home countries, however there is substantial heterogeneity among otherwise similar firms in the extent to which they invest abroad and the locations in which they choose to invest. Though prior research has identified factors such as institutional quality and cross-national connections through cultural, linguistic, or immigration based ties as being important drivers of the volume of cross country venture capital flows, it does not explain firm level heterogeneity in these choices. We propose that the degree to which venture capital firms invest in immigrant entrepreneurs in their home countries is an important differentiator in terms of their subsequent foreign investments. We show that investments by US VC firms in Indian immigrant entrepreneurs is associated with these firms making subsequent investments in India. We find no such effect for investments in non-immigrant entrepreneurs of Indian ethnicity (i.e. second and later generation immigrants). We also find a correspondence between the regional origins of these Indian immigrant entrepreneurs and the regions of India in which the VC firms subsequently invest. VC firms with Indian partners are more susceptible to these effects. The presence of immigrants as connectors in facilitating these investments also appears to limit the need for a local, i.e. Indian co-investment partner. Through these findings, the study contributes to research on global strategy, immigration and venture capital.