Countries increasingly compete to host innovative start-ups to secure and promote economic growth. However, because start-ups seem to be valued differently across countries, both researchers and policymakers must understand the factors determining the variability of early-stage start-up valuations. This study therefore draws on institutional theory and conducts a fuzzy-set qualitative comparative analysis to analyze a sample of 1251 start-up valuations drawn from 13 countries between 2009 and 2016. Our findings show that a common law system together with high levels of innovativeness in a country explain high early-stage start-up valuations. The second configuration leading to high start-up valuations is characterized by favorable cultural circumstances in terms of low levels of uncertainty avoidance and high levels of collectivism, which in combination possibly compensate for a civil law system. Two configurations explaining low start-up valuations are a combination of a lack of innovativeness nationally, and unfavorable informal institutions (i.e., high uncertainty avoidance or low collectivism), regardless of the origins of a nation’s legal system. The last configuration explaining low start-up valuations is a combination of unfavorable informal institutions in terms of high uncertainty avoidance and low collectivism, alongside a civil law system.
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The authors gratefully acknowledge the helpful feedback provided by Andreas Kuckertz and thank the participants of the 20th G-Forum in Leipzig, Germany and the participants of the Academy of Management Meetings in Atlanta, USA for their comments. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
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Berger, E.S., Köhn, A. Exploring the differences in early-stage start-up valuation across countries: an institutional perspective. Int Entrep Manag J (2018). https://doi.org/10.1007/s11365-018-0534-3
- Venture capital (VC)
- Fuzzy-set qualitative comparative analysis (fsQCA)