More than money: Venture capital allocation in national FinTech innovation systems

We examine how venture capital (VC) investment in FinTech entrepreneurship is embedded within a country's national innovation system. Based on an analysis of PitchBook data covering 15,178 FinTech startups across 66 countries, we observe that VC investment drives FinTech startup growth, particularly in contexts with higher FinTech density and supportive innovation systems. Specifically, VC investors allocate more capital to FinTech startups in contexts characterized by favorable legal frameworks, implementation of regulatory sandboxes, extensive use of digital technologies, and a well-developed talent pool. Notably, these moderating effects are more prominent in contexts with higher FinTech activity, highlighting the importance of early-mover initiatives and the influence of clustering dynamics in scaling nascent industries. The study advances innovation systems research by showing that non-financial pillars act as boundary conditions guiding VC allocation toward FinTech startups, while also contributing to emerging literature on regulatory sandboxes as targeted policy tools and clustering effects.