Immigrant remittances and the venture investment environment of developing countries

Despite the increasing importance of financial and social remittances to developing countries, their impact on home-country venture-investing environments has been largely overlooked. I develop a framework grounded in transaction costs economics and social knowledge theories to investigate relationships between remittances and home-country (1) capital availability, (2) new business creation, and (3) economic internationalization. My framework also accounts for individual and collective immigrant attributes that may moderate the impact of remittances on these alternative indicators of the venture investment environment. Analyses of immigrant remittances to 61 developing countries from 2002-2007 indicate that they increase general and more narrowly defined venture capital availability as well as broader openness to international trade. Remittances also increase new business start-up rates when the developing country's public sector is sufficiently small. Positive venture-funding effects of remittances are magnified when coming from immigrants living in highly concentrated communities, but are diminished when coming from highly educated immigrants. Overall, results suggest that developing-country immigrants of varying backgrounds play an important role in venture funding, founding and integration with the world economy. Journal of International Business Studies (2011) 42, 1121-1149. doi:10.1057/jibs.2011.36