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Informal Investment in Transition Economies: Individual Characteristics and Clusters

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Author Info

  • László Szerb

    ()

  • Gábor Rappai
  • Zsolt Makra
  • Siri Terjesen

    ()

Abstract

This paper investigates the factors driving informal investment in Croatia, Hungary and Slovenia. Using Global Entrepreneurship Monitor (GEM) data, we find that the low rates of informal investment activity and the small amounts of investments in these countries are driven by entrepreneurial behaviors consistent with limited market economy experience. We extend prior studies by investigating the role of business ownership, and identify significant differences between individuals with and without business ownership experience in terms of having start-up skills, knowing an entrepreneur and fearing failure. Cluster analysis identifies seven distinct groups of informal investors, and reveals the heterogeneity in terms of investors’ age, gender, level of education, amount of investment, start-up skills, ownership status, income, opportunity perception and country of residence. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11187-006-9019-9
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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 28 (2007)
Issue (Month): 2 (March)
Pages: 257-271

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Handle: RePEc:kap:sbusec:v:28:y:2007:i:2:p:257-271

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Web page: http://www.springerlink.com/link.asp?id=100338

Related research

Keywords: informal investment; entrepreneurship; Global Entrepreneurship Monitor; CEE; transition economies; G24; G28; L26; M13; P20;

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References

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  1. Markku Maula & Erkko Autio & Pia Arenius, 2005. "What Drives Micro-Angel Investments?," Small Business Economics, Springer, vol. 25(5), pages 459-475, December.
  2. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 521-570.
  3. Zoltan Acs & Colm O’Gorman & Laszlo Szerb & Siri Terjesen, 2007. "Could the Irish Miracle be Repeated in Hungary?," Small Business Economics, Springer, vol. 28(2), pages 123-142, March.
  4. Hector Rocha, 2004. "Entrepreneurship and Development: The Role of Clusters," Small Business Economics, Springer, vol. 23(5), pages 363-400, October.
  5. Tyson, Laura d'Andrea & Petrin, Tea & Rogers, F Halsey, 1994. " Promoting Entrepreneurship in Eastern Europe," Small Business Economics, Springer, vol. 6(3), pages 165-84, June.
  6. Klapper, Leora & Sarria-Allende, Virginia & Sulla, Victor, 2002. "Small and medium size enterprise financing in Eastern Europe," Policy Research Working Paper Series 2933, The World Bank.
  7. Mike Wright & Judit Karsai & Zbigniew Dudzinski & Jan Morovic, 1999. "Transition and Active Investors: Venture Capital in Hungary, Poland and Slovakia," Post-Communist Economies, Taylor & Francis Journals, vol. 11(1), pages 27-46.
  8. Kornai, Janos, 1990. "The Affinity between Ownership Forms and Coordination Mechanisms: The Common Experience of Reform in Socialist Countries," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 131-47, Summer.
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Citations

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Cited by:
  1. José Ernesto Amoros & Niels Bosma & Jonathan Levie, 2011. "Ten Years of Global Entrepreneurship Monitor: Accomplishments and Prospects," Global Entrepreneurship Monitor Working Paper Series 1105, Global Entrepreneurship Research Association, revised Aug 2011.
  2. Ramani, Shyama V. & Thutupalli, Ajay & Medovarski, Tamas & Chattopadhyay, Sutapa & Ravichandran, Veena, 2013. "Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability?," MERIT Working Papers 018, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Niels Bosma, 2012. "The Global Entrepreneurship Monitor (GEM) and its Impact on Entrepreneurship Research," Global Entrepreneurship Monitor Working Paper Series 1201, Global Entrepreneurship Research Association, revised May 2012.
  4. José Ernesto Amorós & Miguel Atienza & Gianni Romaní, 2008. "Formal and Informal Equity Funding in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 35(2 Year 20), pages 179-194, December.
  5. Richard L. Constand & Arthur H. Gilbert, Jr., 2011. "E-readiness and Entrepreneurship: A Cross Country Study of the Link between Technological Infrastructure and Entrepreneurial Activity," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 15(2), pages 107-129, Winter.
  6. Claudia Álvarez & David Urbano & José Amorós, 2014. "GEM research: achievements and challenges," Small Business Economics, Springer, vol. 42(3), pages 445-465, March.
  7. Karsai, Judit, 2007. "Kifelé a zsákutcából. Állami kockázati tőke és innováció
    [Out of the blind alley. State venture capital and innovation]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1085-1102.
  8. Kiss, Andreea N. & Danis, Wade M. & Cavusgil, S. Tamer, 2012. "International entrepreneurship research in emerging economies: A critical review and research agenda," Journal of Business Venturing, Elsevier, vol. 27(2), pages 266-290.
  9. Dirk Clercq & Dominic Lim & Chang Oh, 2014. "Hierarchy and conservatism in the contributions of resources to entrepreneurial activity," Small Business Economics, Springer, vol. 42(3), pages 507-522, March.
  10. De Clercq, Dirk & Meuleman, Miguel & Wright, Mike, 2012. "A cross-country investigation of micro-angel investment activity: The roles of new business opportunities and institutions," International Business Review, Elsevier, vol. 21(2), pages 117-129.
  11. Judit Karsai, 2012. "Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades," IEHAS Discussion Papers 1201, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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