Do networks of financial intermediaries help reduce local bias? Evidence from cross-border venture capital exits

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Abstract

Contributing to the literature on local bias and financial networks, we examine how direct and indirect network ties of financial intermediaries mitigate the effects of distance and preference for local investments. In our analysis of cross-border venture capital exits, we find that proximity within networks facilitates cross-border transactions, which suggests that network distance is an important dimension of distance in addition to its geographical and cultural dimensions. The results also suggest that network distance affects the reach and quality of mediated information: indirect ties to partners' partners, with their broad reach, facilitate the identification of investment opportunities, whereas direct ties, which have certification effects, facilitate quality assessment.

Original languageEnglish
Pages (from-to)704-721
Number of pages18
JournalJournal of Business Venturing
Volume29
Issue number5
DOIs
Publication statusPublished - Sep 2014
MoE publication typeA1 Journal article-refereed

Keywords

  • Cross-border venture capital
  • Cultural distance
  • Exits
  • Geographical distance
  • Network distance

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