Investing From the Heart: The Influence of Home Country Political Sentiment on Cross-Border Venture Capital Investment

Abstract Extant studies on cross-border venture capital (VC) investment predominantly focus on how country-level formal institutions impact the flow of VCs across borders, but the potential role of country-level sentiments in this process has received less attention. Drawing upon the trust literature, we explore how home country political sentiment affects cross-border VC investment. Using data on Chinese VCs’ cross-border investments from 2000 to 2021, we find that home country political sentiment positively affects the amount of cross-border VC investment. Government VC (GVC) and connected VC (through sentiment transmission) positively, while investor managerial team education and investor host country experience (through sentiment suppression) negatively, moderate the influence of home country political sentiment.