Historical Military Conflict and Cross-Border VC Performance: The Role of Ownership Control

This study investigates the effect of historical military conflict (between the home countries of venture capital (VC) firms and portfolio companies) on the performance of cross-border VC investments. Using exhaustive data on global cross-border investments during 1986-2017, we find that adverse memories imprinted by historical military conflict have a negative effect on cross-border performance as measured by internal rate of return and public market equivalent. We show that nation-dyadic (i.e. political affinity) and ownership control strategy (i.e. board seat and syndication)-related contingencies moderate the relationship between historical military conflict and cross-border performance. Collectively, our findings shed light on the presence of intergroup interaction challenges and mistrust when investing in cross-border VC deals and demonstrate channels to mitigate their adverse effects.