Date of Graduation

Spring 5-22-2015

Document Type


Degree Name

Master of Arts in Economics


College of Arts and Sciences



First Advisor

Prof. Sunny Wong

Second Advisor

Prof. Jacques Artus

Third Advisor

Prof. Man-Lui Lau


This study analyzes the determinants of early-stage VC investments by identifying characteristics in the economic, institutional, as well as cultural framework that could explain the diverging levels of early-stage VC investments across countries. Data was assembled for 16 countries during the period from 1995 until 2013. The results indicate that countries that are more open to trade are associated with higher levels in early-stage venture capital. A higher unemployment rate negatively affects a country’s level of early-stage VC funds. Higher R&D expenditures as a proxy for the technological and innovation capacity in a country as well as a higher value in the NASDAQ Composite Index as a proxy for general stock market conditions result in a higher amount of early-stage VC investments. Moreover, the results reveal that favorable socioeconomic conditions for both entrepreneurs and venture capitalists positively correlate with early-stage VC investments. In terms of the cultural environment, the results show that higher degrees of masculinity and power distance result in more early-stage venture capital invested whereas a higher degree of uncertainty avoidance negatively affects early-stage VC investments. The study also analyzes the venture capital industries in the United States and Europe, with particular focus on Germany and France, and tries to identify institutional and cultural framework conditions in place that may explain the different levels of VC investments in the respective countries. Representing an often overlooked predecessor for venture capital, the essential role of the angel investment market for the formal venture capital industry is also illustrated in this paper.


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