Institutional differences and the development of entrepreneurial ventures: A comparison of the venture capital industries in Latin America and Asia Garry D Bruton 1 David Ahlstrom 2 and Tomas Puky 3 1 M J Neeley School of Business, Texas Christian University, Fort Worth, USA; 2 Department of The Chinese University of Hong Kong, Shatin, Hong Kong; 3 VA Tech Hydro Corporation, University Research Park, Charlotte, USA Correspondence: D Ahlstrom, Department of Management, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong. Tel: þ 852 2609 7748; Fax: þ 852 2609 7748; E-mail: ahlstrom@baf.msmail.cuhk.edu.hk Received: 8 August 2005 Revised: 11 September 2008 Accepted: 21 September 2008 Online publication date: 19 March 2009 Abstract This paper examines how differences in distinct institutional clusters of countries impact on the vital entrepreneurial activity of venture capital, and how individuals, organizations, and their collective action in turn shape those institutions. The focus on venture capital offers researchers the opportunity to view an industry that comes from a common root, with strong and consistent traditions, in which to examine how the differing institutional settings impact on behaviors in different markets, and how the institutions themselves may change in these settings. We also focus on emerging economies, since such economies offer a natural laboratory to study the impact of institutional change. Specifically, this paper employs an institutional theory perspective to examine venture capital in two regions of the world that form institutional clusters of countries – Latin America and Asia. It is found that the venture capital industry exhibits a strong consistency across many dimensions; yet institutions in these two distinct settings result in significant differences in industry practice. Therefore this research is able to contribute to both empirical and theoretical understanding of emerging economies, institutions in those environments, and venture capital. Journal of International Business Studies (2009) 40, 762–778. doi:10.1057/jibs.2009.3 Keywords: institutional theory; institutional change; venture capital; emerging econo- mies; Asia; Latin America INTRODUCTION This paper examines how differences in distinct institutional clusters of countries impact on a key entrepreneurial activity such as venture capital, and how individuals and organizations can in turn shape those institutions (Lounsbury & Crumley, 2007; Olson, 1965; Perkmann & Spicer, 2007). Venture capital offers a useful setting to enhance our understanding of the impact of institutions in different emerging economies. Mature economies recognize venture capital as an industry with widely held standards of behavior among participants (Fried & Hisrich, 1994). Starting in the United States (US), the industry has expanded around the world, with an estimated $31 billion invested in 2005 (Ernst & Young, 2006; Gupta, 2000). This total includes not only $22.1 billion invested in the US, but also the $4.3 billion invested in Journal of International Business Studies (2009) 40, 762–778 & 2009 Academy of International Business All rights reserved 0047-2506 www.jibs.net