Institutional learning, cultural differences and the motivation of syndication among cross-border venture capital firms in China

Along with the globalisation trend, cross-border venture capital (VC) investments in emerging markets have also attracted many scholars' attentions. Confronted with the uncertainties of cultural distance and institutional difference, cross-border VC firms choose syndication as an effective investment strategy to reduce the risk. In this paper, we systematically investigate the motivation of the cross-border venture capitalists to form syndication with local VC firms when they invest in China's venture capital market, i.e. the determinants of their syndication decisions. To our knowledge, we are the first to incorporate cultural distance and institutional learning into the analysis of cross-border syndication decisions, and we believe our research will help investors better understand the foreign VC firms' syndication behaviours under the unique culture and institutional environment of China. Our empirical results show that cultural distance will cause a series of communication and trust issues, and thus increases the probability of cross-border syndication. On the other hand, institutional learning can decrease the uncertainty caused by cultural distance and institutional difference, and thus decrease the motivation of cross-border syndication. We also find that the syndication decisions are influenced by other factors such as investment scale, investment year and venture location.