Follow the Money: How Venture Capital Facilitates Emigration of Firms and Entrepreneurs in Europe

49 Pages Posted: 9 Jul 2019 Last revised: 21 Oct 2020

See all articles by Reiner Braun

Reiner Braun

Technische Universität München (TUM) - TUM School of Management

Stefan Weik

Technische Universität München (TUM) - TUM School of Management

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Date Written: July 5, 2019

Abstract

An increasingly global venture capital (VC) business raises the question whether foreign VCs’
investments pull economic activity away from domestic economies. Using a large sample of
VC-backed European ventures, we analyze whether involvement of foreign VCs influences
firms’ and entrepreneurs’ migration patterns. We provide evidence that foreign investors, in
particular from the U.S., on average, back much better European ventures and increase the
likelihood of foreign exits and emigration of entrepreneurs. These effects are robust to
endogenous selection. Our findings suggest that VC firms are a funnel through which high-impact
economic actors are absorbed by countries with foreign VC presence. Governmental efforts to increase domestic supply of VC should have a positive impact on domestic economies.

Keywords: foreign venture capital, exit, international migration

JEL Classification: G15, G24, F22, F30, F65, F66

Suggested Citation

Braun, Reiner and Weik, Stefan and Achleitner, Ann-Kristin, Follow the Money: How Venture Capital Facilitates Emigration of Firms and Entrepreneurs in Europe (July 5, 2019). Available at SSRN: https://ssrn.com/abstract=3415370 or http://dx.doi.org/10.2139/ssrn.3415370

Reiner Braun (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, Deutschland 80333
Germany
+498928925181 (Phone)
+498928925188 (Fax)

HOME PAGE: http://www.ef.wi.tum.de/

Stefan Weik

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany
+49 89289 25380 (Phone)

HOME PAGE: http://www.ef.wi.tum.de

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

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