Cultural context as a moderator of private entrepreneurship investment behaviour

Abstract

This chapter examines the effects of national culture on the investment decisions of three different groups of private equity investors: venture capitalists (VCs), business angels (BAs) and relation-based investors (friends and families). We argue that national culture will influence the decision to invest in entrepreneurial business ventures in different ways for each of the three private equity investor groups. VCs are professional investors and have a culture of VC investment that transcends and minimizes some of the differences in national culture. In contrast, relation-based investors, many of whom invest altruistically on an ad hoc basis in family or friends’ businesses will be most affected by national culture. The investment decision for friends and family is a function of the strength and distance of the relationship, perceived needs and alternatives for the entrepreneur, and a sense of obligation. We propose that the effects of national culture on BA investor decision making will lie somewhere between VC and relation-based investor decision making depending on BA investment experience levels.