Institutional Distance and Cross-Border Venture Capital Investment Flows by Curt B. Moore, G. Tyge Payne, R. Greg Bell, and Justin L. Davis Cross-border investments are an increasingly important part of venture capitalists’ portfolios. In order to better understand venture capitalists’ international investment decisions, we use dyadic pairings of European countries over a 10-year time span to examine how regulative, normative, and cultural-cognitive institutional differences are related to cross-border venture capital invest- ment flows. Results demonstrate that increased normative and cultural-cognitive distance reduce cross-border investments, whereas regulative distance shows no relationship. Together, these find- ings suggest that institutional dimensions do influence venture capital investment decisions and that the type of distance can have differing effects. Introduction International entrepreneurship is a burgeon- ing field of inquiry and is defined as “the dis- covery, enactment, evaluation, and exploitation of opportunities—across national borders— to create future goods and services” (Oviatt and McDougall 2005, p. 540). Scholarly research in this area of study has demonstrated a number of outcomes of international entrepreneurship such as the introduction of innovative new prod- ucts or processes (Acs and Audretsch 2003), increased levels of competition (Nickell 1996), and the creation of knowledge (Audretsch and Feldman 1996; Audretsch and Keilbach 2004). Evidence also suggests that venture capital (VC) investments are central to the levels of entrepre- neurial activity occurring within and between nations by facilitating the increased exchange of assets, information, ideas, and other resources (Bruining and Wright 2002; Bruton et al. 2010; Kreft and Sobel 2005; Manigart 1994). However, despite VC’s apparent importance to entrepre- neurial activities occurring among and between different nations, researchers have only recently underscored the key role that venture capitalism plays in the process (Alhorr, Moore, and Payne 2008; Bygrave et al. 2003; Wright, Pruthi, and Lockett 2005). Venture capitalists have shown an increas- ing interest in crossing borders to gain access to investment opportunities. According to Gompers, Lerner, and Scharfstein (2005), approximately half of new VC funds in Asia and Europe originate from nondomestic sources. Furthermore, the share of VC inflows from nondomestic sources more than doubled in Europe from 1988 to 2003, whereas Curt B. Moore is an Assistant Professor of Strategic Management and Entrepreneurship at Texas Tech University. G. Tyge Payne is an Associate Professor of Strategic Management and Jerry S. Rawls Professor of Management at Texas Tech University. R. Greg Bell is an Assistant Professor at the University of Dallas. Justin L. Davis is an Assistant Professor of Strategic Management at the University of West Florida. Address correspondence to: G. Tyge Payne, Area of Management, Texas Tech University, 15th & Flint Ave., Rawls College of Business, Box 42101, Lubbock, TX 79409-2101. E-mail: tyge.payne@ttu.edu. Journal of Small Business Management 2013 ••(••), pp. ••–•• doi: 10.1111/jsbm.12079 MOORE ET AL. 1