The increasing number of cross-border investments is one of the most remarkable phenomena in the venture capital (VC) industry (Wright et al., 2005). In this paper, we study the drivers of this behaviour.

Investing in a foreign country is a major decision. VC firms face severe competition from dominant domestic players. Reducing information asymmetries and exerting monitoring and value adding activities are more difficult as geographical distance increases. Understanding different institutional environments raises additional barriers. However, local competitive pressures, opportunities in foreign regions and the trend towards larger funds stimulate foreign investments.

We focus on financial, human and social capital of VC firms in combination with competitive, institutional and strategic factors to explain their degree of cross-border investments.