What are the Signals of New Technology Based Ventures to Entice Venture Capitals in Developing Countries

The present study employs insight from signalling theory to address the research question, “How do venture capitals invest new technology based ventures in developing countries?” With this research question, it examines two ways. First, what is the internal value of new technology based ventures and the identity of endorsing organization signalling to venture capitals’ investment in developing countries? Second, do venture capitals play a pivotal role for the growth of new technology based ventures in developing countries? This study then tests these hypotheses using the new technology based ventures in Korea which is a typical example of developing countries. The results find that relevant industry experience in entrepreneurs’ human capitals as internal value is a positive signal to venture capitals, while educational level has no significance and show that collaboration with business groups and certification of government as the external endorsements by respectable organizations are influential in attracting venture capitals’ investments. The results also support the positive role of venture capitals’ investments in terms of the faster IPO of new technology based ventures.