Home Country Networks and Foreign Expansion: Evidence from the Venture Capital Industry

We argue that higher-status organizations, those facing a greater network constraint, and those whose network partners have already expanded abroad are more likely to pursue opportunities in foreign markets. We also argue that social networks affect how the organization reacts to uncertainty in markets. Higher-status organizations and those more network-constrained prefer markets with less uncertainty, while organizations whose partners have expanded to less-secure markets exhibit more tolerant attitudes towards uncertainty. Using data on the syndication experience and market entries of 1,010 American venture capital firms over the 1990-2002 period, we find robust support for the predictions involving social status and partners' expansion, and some evidence for the impact of network constraint.