Multilateral development banks: understanding their impact on start-up development in Latin America

Abstract

Purpose

This paper aims to examine the relative performance of multilateral development banks venture capital funds (MDBVCs) compared to that of government-sponsored venture capital funds (GVCs), assessing their impact on invested start-ups.

Design/methodology/approach

First, the authors survey the literature to understand the performance drivers of public programs designed to foster venture capital (VC). Second, the authors analyze the characteristics of multilateral development banks (MDBs) VC-related efforts. Third, based on their goals, structure, governance and management processes, the authors propose and test the hypothesis that MDBs initiatives outperform comparable public programs, overcoming the main limitations of the latter.

Findings

The authors find that start-ups funded by MDBVCs outperform GVC-funded start-ups in terms of access to subsequent financing and international expansion. Consistent with previous studies, the authors find that start-ups funded by private VCs show the highest levels of performance.

Originality/value

The paper features an unstudied actor – i.e. MDBVCs-, and an unstudied region – i.e., Latin America-, using a unique data set of 437 start-ups that received VC investments in 7 Latin American countries during the study period 2000–2018.

Citation

Dams, C., Sarria Allende, V. and Murcia, M.J. (2021), "Multilateral development banks: understanding their impact on start-up development in Latin America", European Business Review, Vol. 33 No. 6, pp. 942-956. https://doi.org/10.1108/EBR-11-2020-0274