TY - JOUR
T1 - Venture capital and the international relocation of startups
AU - Weik, Stefan
AU - Achleitner, Ann Kristin
AU - Braun, Reiner
N1 - Publisher Copyright:
© 2024 The Authors
PY - 2024/9
Y1 - 2024/9
N2 - Venture capital (VC) in most economies outside the U.S. is still developing and relies heavily on foreign investment. This raises concerns that startups are migrating out of these countries as a consequence. Using a novel large-scale dataset of startup headquarter (HQ) location histories across a heterogeneous set of 17 countries, we document novel facts on startup relocation across countries. First, international startup relocation is relatively common: about 6 % of startups move across borders, representing 17 % of the total startup value created. Second, by far, most relocation (85 %) is directed to the US. Third, relocation leads to the majority of startups' workforce ending up in the foreign country. Fourth, foreign VC investment, particularly from the US, is strongly associated with relocation, with the effect implying that one in ten US investments leads to relocation. This foreign VC effect is robust to matching, panel data, and instrumental variable analyses, and is more pronounced when startup financing conditions are poor. These findings shed light on the global movement of startups and suggest that the outflow can be addressed by improving startups' local financing conditions.
AB - Venture capital (VC) in most economies outside the U.S. is still developing and relies heavily on foreign investment. This raises concerns that startups are migrating out of these countries as a consequence. Using a novel large-scale dataset of startup headquarter (HQ) location histories across a heterogeneous set of 17 countries, we document novel facts on startup relocation across countries. First, international startup relocation is relatively common: about 6 % of startups move across borders, representing 17 % of the total startup value created. Second, by far, most relocation (85 %) is directed to the US. Third, relocation leads to the majority of startups' workforce ending up in the foreign country. Fourth, foreign VC investment, particularly from the US, is strongly associated with relocation, with the effect implying that one in ten US investments leads to relocation. This foreign VC effect is robust to matching, panel data, and instrumental variable analyses, and is more pronounced when startup financing conditions are poor. These findings shed light on the global movement of startups and suggest that the outflow can be addressed by improving startups' local financing conditions.
KW - Foreign direct investment
KW - Headquarters
KW - Relocation
KW - Venture capital
UR - http://www.scopus.com/inward/record.url?scp=85194588671&partnerID=8YFLogxK
U2 - 10.1016/j.respol.2024.105031
DO - 10.1016/j.respol.2024.105031
M3 - Article
AN - SCOPUS:85194588671
SN - 0048-7333
VL - 53
JO - Research Policy
JF - Research Policy
IS - 7
M1 - 105031
ER -