Title: International allocation determinants for institutional investments in venture capital and private equity limited partnerships

Authors: Alexander Peter Groh, Heinrich Liechtenstein

Addresses: EMLYON Business School, 23 avenue Guy Collongue, 69134 Ecully, France. ' IESE Business School – Barcelona, University of Navarra, Av. Pearson, 21, 08034 Barcelona, Spain

Abstract: We examine the determinants of institutional investors when deciding about international capital allocation in venture capital and private equity limited partnerships through a questionnaire addressed to limited partners world-wide. The respondents provide information about their criteria for international asset allocation. The protection of property rights is the dominant concern, followed by the need to find local quality general partners, and the quality of management and skills of local entrepreneurs. Furthermore, the expected deal flow plays an important role in the allocation process, while investors fear bribery and corruption. Public funding and subsidies are not important for the international allocation process. Hence, private money does not follow public money. Additionally, IPO activity and the size of local public equity markets are not as relevant as proposed by other researchers. Our results can support policymakers to increase the attractiveness of their countries for institutional investors to receive more risk capital for innovation, entrepreneurship, employment and growth.

Keywords: venture capital; private equity; international asset allocation; institutional investors; international capital allocation; limited partnerships; property rights protection; local entrepreneurs; bribery; corruption; public funding; subsidies; IPO activity; local public equity markets.

DOI: 10.1504/IJBAAF.2011.041454

International Journal of Banking, Accounting and Finance, 2011 Vol.3 No.2/3, pp.176 - 206

Published online: 30 Sep 2014 *

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