Exploring the differences in early-stage start-up valuation across countries: an institutional perspective

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.