Felix Hoch & Todor Lohwasser recently published an article in the International Journal of Entrepreneurial Venturing, shedding new light on the impact of institutions on venture capital investments. The study challenges the conventional belief that higher institutional development fosters venture capital investments. According to the study, the empirical evidence for venture capital investments is surprisingly unclear, despite predictions from institutional theory.

Hoch's study takes a more nuanced approach, exploring the unique characteristics of venture capital investors and examining the distinct effects of institutional strength and institutional stability on venture capital investments. The results of the study, based on data from 58,062 individual companies across 104 countries, demonstrate that ventures attract higher investments in countries with higher institutional strength but lower institutional stability.

Interestingly, the study found that both institutional strength and institutional stability increase the survivability of funded ventures, highlighting the need for a dynamic perspective on institutional effects for founders, investors, and policy-makers. The study suggests that these institutional effects differ depending on institutional strength and stability, as well as firm characteristics, and performance dimensions.

Hoch's study is hoping to have significant implications for venture capital investors, entrepreneurs, and policy-makers, as it provides new insights into the complex relationship between institutions and venture capital investments.