Formal institutions, culture, and venture capital activity: A cross-country analysis

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268 Scopus citations


Why does the level of venture capital activity vary across countries? This study suggests that the variation can be attributed to the different levels of formal institutional development. Further, this study proposes that venture capitalists respond differently to the incentives provided by formal institutions depending on different cultural settings. Analysis of VC activity for 68 countries during the 1996-2006 period shows that formal institutions have a positive effect on the level of venture capital activity, but this effect is weaker in more uncertainty-avoiding societies and in more collectivist societies. This study has useful theory and policy implications for venture capital and entrepreneurship development.

Original languageEnglish (US)
Pages (from-to)95-111
Number of pages17
JournalJournal of Business Venturing
Issue number1
StatePublished - Jan 2012

Bibliographical note

Funding Information:
We appreciate the valuable comments from the Editor and the two anonymous reviewers. We gratefully acknowledge data support from the European Venture Capital Association (EVCA) and Jennifer Vandermosten. We thank John Thomas and the HSBC Center for Global Business Leadership at the State University of New York at Buffalo for financial support. The usual disclaimer applies.


  • Collectivism
  • Institutions
  • National culture
  • Uncertainty avoidance
  • Venture capital


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