Venture capital, innovation, and entrepreneurial investment in India: The moderating role of caste and tribal institutions

This study examines how venture capital (VC) availability drives entrepreneurial investment in India from 2000 to 2021. Using the national innovation system (NIS) framework, we use a comprehensive measure of VC availability to assess its impact on startup investments across Indian states. A novel aspect of this research is the inclusion of India's caste and tribal system, a distinctive cultural institution, as a key moderating factor. The analysis accounts for individual startup characteristics and broader economic, technological, and institutional influences at both the state and national levels. The findings demonstrate that VC availability significantly predicts entrepreneurial investment. Additionally, the caste and tribal system exerts both direct and indirect moderating effects on this relationship. Sensitivity and endogeneity analyses confirm the robustness of these results. Moreover, the caste system diminishes the positive mediating effects of financial literacy, linguistic diversity, and government initiatives on VC availability and entrepreneurial investment. These findings support the NIS theory, emphasizing the crucial role of VC availability and the impact of local cultural institutions on fostering entrepreneurship in large emerging economies.