The Uppsala model proposes that firms expand abroad incrementally, increasing commitment and expanding market activities as they gain market knowledge. Firms that expand into new markets must overcome the liability of foreignness. Psychic distance between the home country and a target market may slow expansion into the new market. This study makes use of institutional distance measures to predict the pace at which venture capital firms invest overseas. Hypotheses examine firm behavior in terms of frequency of investment, amounts invested, and share amounts invested. This study makes use of a unique dataset compiled from two sources which covers the activities of 704 venture capital firms in China from 1995 to 2007. Regression models show support for hypotheses that institutional distance predicts investment behavior in terms of frequency of investment and amounts invested, indicating weak support that the Uppsala Model predicts venture capital internationalization.
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