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How does Entrepreneurial Activity Affect the Supply of Business Angels?

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Author Info
André van Stel
Kashifa Suddle
Andrew Burke
Chantal Hartog

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Abstract

This paper examines the prevalence and the determinants of informal entrepreneurial investment activity (i.e. the 3 FFFs –friends, fools and family– and business angels), using a data set of more than 175,000 individuals – including some 4000 informal investors – in a large number of highly developed countries over the period 2002-2004. We distinguish between micro-level and macro-level determinants. The results uncover a positive virtuous circle where the demand for business angel finance tends to generate its own supply as a result of micro and macro factors. Our results also suggest that higher levels of entrepreneurial activity at the country level increase the probability that venture capital and business angel finance work in tandem with one another as complements rather than substitutes. Overall, the results uncover some important new relationships that perhaps provide some good news that market forces to some extent appear to naturally ameliorate equity gaps faced by entrepreneurs.

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Paper provided by EIM Business and Policy Research in its series Scales Research Reports with number H200813.

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Length: 33 pages
Date of creation: 30 Sep 2008
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Handle: RePEc:eim:papers:h200813

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  4. Andrew Burke & Aoife Hanley, 2006. "Bank Interest Margins And Business Start-Up Collateral: Testing For Convexity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 319-334, 07. [Downloadable!] (restricted)
  5. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  6. Stuart Fraser & Francis J. Greene, 2006. "The Effects of Experience on Entrepreneurial Optimism and Uncertainty," Economica, London School of Economics and Political Science, vol. 73(290), pages 169-192, 05. [Downloadable!] (restricted)
  7. Burke, Andrew E, 1997. " Small Firm Start-up by Composers in the Recording Industry," Small Business Economics, Springer, vol. 9(6), pages 463-71, December. [Downloadable!] (restricted)
  8. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  9. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2000. " When Less Is More: Distinguishing between Entrepreneurial Choice and Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 565-87, December. [Downloadable!] (restricted)
  10. Laszlo Szerb & Siri Terjesen & Gabor Rappai, 2007. "Seeding new ventures - green thumbs and fertile fields: individual and environmental drivers of informal investment," Jena Economic Research Papers in Economics 2007-030, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek. [Downloadable!]
  11. Blanchflower, D.G. & Oswald, A., 1991. "What Makes an Entrepreneur?," Economics Series Working Papers 99125, University of Oxford, Department of Economics.
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  12. Romer, Paul M, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter. [Downloadable!] (restricted)
  13. Berger, Allen N. & Udell, Gregory F., 1990. "Collateral, loan quality and bank risk," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 21-42, January. [Downloadable!] (restricted)
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  1. Sander Wennekers & Jolanda Hessels & Chantal Hartog, 2009. "Global Entrepreneurship Monitor 2008 The Netherlands," Scales Research Reports A200914, EIM Business and Policy Research. [Downloadable!]
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