These venture capitalists  bring with them wealth of experience from developed countries and this will lead to the improvement of financial practices in the countries they invest in

I agree with Robert Mugo.  I also think it is a chicken-and-the-egg type question or a positive feedback loop.  In other words, I don't think there can be much institutional venture capital without first having a certain degree of financial liberalization.  The latter would include established Rule of Law to support ownership rights and transfer, claims, contracts, etc.  It would also entail a freely exchangeable currency and reasonably well established capital markets (issuance of equity and bonds, etc.).  Without this institutional infrastructure, venture capital is unlikely to take off.  

Dear Ahlem Bougouffa

Greetings,

Yes , the venture capital  with skills , new methods , new strategies in developed countries contribute in financial liberalization in emerging markets , but the environment also may be effect , so any investment need  a certain and low risk to have a success projects .

Best Regards

Emerging market needs innovated and creative project to solve the problem of needy society thereby venture capital financing promote the emerging market in new direction to liberalize the old set of standard levied by conventional thinkers.

Thank you.

Hello Ahlem:

By definition Venture Capital (VC) helps in nurturing and guiding new ventures to life. Clearly their efforts help in the early stage survival of businesses. On the other hand, Financial Liberalization (FL) is focused more on insuring efficiency in the performance of money and capital market, vis-a-vis economic transactions. The major guarantors of FL are the economic/financial market regulators of the emerging countries. With that said, for VC to be effective in helping FL, one must have an efficient and well informed Financial regulatory agencies; otherwise the efforts of VCs towards Financial Liberalization will likely be short lived.

Regards.

These might help:

Ollor, W. G., & Dagogo, D. W. (2009). The effect of venture capital financing on the economic value added profile of Nigerian SMEs. African Journal of Accounting, Economics, Finance and Banking Research, 5(5).

Kaminsky, G. L., & Schmukler, S. L. (2008). Short-run pain, long-run gain: Financial liberalization and stock market cycles*. Review of Finance, 12(2), 253-292.

I agree with the preceding views.  There are plusses and minuses at once in this issue.  VC is much needed.  In fact in emerging markets all capital that is invested in businesses are like VC due to the lack of overall transparency, accountability, and responsibility issues.  Further, the treatment of investing shareholder, in this case the VC, will bring in a lot of experience and guidance and direction to the business.  However, by nature they want to cash out when the time comes.  In this case the financial sector infrastructure and the markets will be the outlet.  If there is inadequate enforcement of the rule of law (property rights, transfer, contracts, market access, crony capitalism blues, etc) then the perceived risk are going to be extremely high in that market place.  IPOs will not allow for full pricing of the risks underlying the business venture, and therefore the stock will usually be underpriced, or it will not reach its potential.  THis is a major drawback in investing in emerging markets.  VC formation in the sense of the say US Silicon Valley applications will be enormously risky.  Investors will require very high premiums to enter this market.  THus one possible way out of this is to have a strong market for control and this requires behind the scenes negotiations.  You do not need a financial market for that.  THis is one of the weaknesses of financial liberalization without adequate legal and regulatory frameworks in place, and a strong and liquid capital markets formation.