The political, socioeconomic and legal determinants of venture capital performance in developed nations

Abstract

This study examines the political, socioeconomic and legal determinants of cross-country variance in venture capital (VC) fund performance. These three dimensions of impact are reviewed in the context of economic and VC influence based on which fund performance dependence is hypothesized. The data of this study is obtained from PitchBook for the period from 1998 to 2012 for EEA member states, North America, Israel and the UK. The sample of 1,446 observations was regressed on the performance by variables for the political environment, entrepreneurial environment and the respective legal system origin. The methodical basis of this econometric model was an ordinary least squared regression. The findings of this study provided evidence for a strong link between the absence of political hazards, more specifically political stability and regulatory quality, and superior performance of VC funds. It further suggests that the degree of a country’s intrinsic entrepreneurial drive, the tax rate levied on corporate income and labor market regulatory legislation facilitated a certain entrepreneurial environment that appeared to significantly influence individual VC fund performance. This study additionally revealed that the common law system provided a more favorable environment for VC funds to yield higher returns than case law-based systems This study contributes a novel approach to the determination of VC fund performance with implications for academics and VC fund stakeholders alike.

Date of Award	17 Oct 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Fátima Shuwaikh (Supervisor)