Cross-Border Venture Capital Investments: What Is the Role of Public Policy?

摘要

(1) Background: Cross-border venture capital (VC) investments play an important role inthe scaling up of high-growth companies. However, policymakers worry that foreign VCinvestments transfer the majority of economic activity to the investor country. On the one hand,start-ups welcome the foreign capital, expertise, and networks that accompany cross-borderinvestments. On the other hand, policymakers are concerned that cross-border investmentspredominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem.This paper describes a framework for how policymakers can develop a set of policies toward crossborder VC investments. (2) Methods: The paper examines available data and trends about the roleof cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains theunderlying economic challenges and develops a policy framework. (3) Results: The analysis showsthat in addition to policies that aim to attract foreign investors, there are also important policies forthe development of the domestic VC market. The analysis encompasses policies that are bothfinancial and non-financial in nature. (4) Conclusions: A core insight for policymakers is to retain abalance of initiatives, attracting foreign investors while simultaneously making sure to strengthenthe country’s domestic VC industry and innovation ecosystem. The mix of policies will adjust as thedomestic ecosystem matures.