Financial crises and venture capital development: evidence from Indonesia

ABSTRACT

This exploratory study examines how financial crises impede or support venture capital (VC) development in the context of Indonesia and the 1997–1998 Asian financial crisis (AFC). Using a mixed-methods research methodology, the study finds that financial crises have divergent effects on VC development. Financial crises support VC development through accelerated VC practise diffusion, but impede that development by slowing VC enabling conditions. The effects of the substantial macro institutional changes often associated with financial crises are insufficient to overcome these impediments, resulting in a smaller VC industry.

KEYWORDS:

• Asian financial crisis
• external shocks
• financial crises
• Indonesia
• mixed methods
• venture capital

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

David Lingelbach

David Lingelbach is an associate professor of entrepreneurship at the Merrick School of Business, University of Baltimore, USA. He earned a B.S. in political science and economics and a M.S. in political science, both from the Massachusetts Institute of Technology, and a PhD in management studies from the University of Exeter. He researches in the areas of entrepreneurship and entrepreneurial finance in developing and emerging economies.