National distances, international experience, and venture capital investment performance

•We extend existing literature by addressing the impact of two distinct but complementary national distances on international venture capital investment performance: institutional and cultural distances.•We found through logit and Heckman analyses of a large sample that institutional and cultural distances negatively affect the likelihood of international venture capital exit success.•We further contribute to the literature by examining how VCs may use their international experience to mitigate the negative consequences of national distances.•We found that VCs' broad international experience across diverse countries significantly attenuates the negative effect of institutional distance, but that neither VCs' broad international experience nor VCs' host country specific experience significantly attenuate the negative effects of cultural distances.

This study examines how the performance of cross-border venture capital investments is affected by national institutional and cultural distances between the environments of venture capitalists (VCs) and investee ventures. We propose that institutional and cultural distances will decrease VCs' effectiveness in conducting venture capital activities and negatively affect investment performance in terms of exit success, and obtain supportive evidence while controlling for geographic distance. We further analyze how VCs can use their international experience to mitigate the negative consequences of national distances. We find that while broad international experience in diverse countries attenuates the deleterious effects of institutional distance in a significant way, it does not have a similar impact in attenuating the negative effects of cultural distance.