Handbook of Research on Venture Capital: Volume 2
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Handbook of Research on Venture Capital: Volume 2

A Globalizing Industry

Edited by Hans Landström and Colin Mason

This Handbook charts the development of venture capital research in light of the global financial crisis, starting with an analysis of the current venture capital market and the changing nature of the business angel market. Looking at governance structures; the performance of venture capitalists in terms of investments, economic impact and human capital; geographical organization of business angels and venture capital global ‘hotspots’; this book also analyses the current state of venture capital research and offers a roadmap for the future.
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Chapter 11: Global venture capital ‘hotspots’: developing countries

David Lingelbach


Venture capital (VC) is a dynamic financial process that is in a permanent state of disequilibrium, especially in economies characterized as ‘developing’. The developing country context in which this chapter considers VC consists of those economies defined by the World Bank as middle-or low-income (China, a low-income country, is considered in a separate chapter of this Handbook). Developing countries are often characterized by weak institutional environments, refl ecting limited access orders in which dominant elite coalitions limit innovation to maximize their economic rents (North et al., 2009). As a consequence, innovative entrepreneurs – the typical target investees of VC funds – face unique challenges not usually found in strong institutional environments such as those in the US, Europe and Japan. Despite these challenges, 19 middle-or low-income countries or regions currently have active national VC industries – defined as the presence of a venture capital association (Kenney et al., 2006). These include Brazil, China, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Philippines, Poland, Russia, South Africa, Thailand, Tunisia and Turkey, and the African, Asia-Pacific, the Middle East and Latin American regions. Of the economies addressed in this chapter, India, Brazil, South Africa and Russia have the most active national VC industries at present, and each has also attracted significant cross-border VC activity. Other economies, such as Indonesia, Malaysia and South Africa, have industries dominated by government investment, at least in the early-stage category. Seventeen developing economies rank amongst the top 50 economies in the world for capacity for innovation (Sala-i-Martin, 2010), and eight of these also have national VC associations.

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