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

Author: Yong L. & Shaker A. Z.
Date: September 2011

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 uncertaintyavoiding societies and in more collectivist societies. This study has useful theory and policy implications for venture capital and entrepreneurship development.

Geography: Gobal

Type of study: Academic article

Relevant for: GP Venture capital, Associate

Source: Journal of Business Venturing

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