inancing Innovation: Challenges, Opportunities, and Trends

The aim of this section is to offer a comprehensive review of research on the financing of innovation. After presenting the challenges associated with financing innovation from a theoretical point of view, the section synthetizes extant literature to show how these challenges constrain the process of raising funds and investing in innovation. The section then describes the role of business angels and venture capital funds, as well as public policy initiatives in support of these investors. Albeit these instruments have been traditionally conceptualized as remedies to these problems, the section also stresses their limitations and critical aspects. Finally, the section provides an overview of the most recent and emerging tools of financing innovation, such as crowdfunding. In particular, we adopt a business-law perspective to describe these instruments and illustrate the trade-off between the protection of investors and the facilitation of innovation, which challenges both scholars and policymakers. The section concludes with a synthetic research agenda with the aim to encourage future research on the functioning of these financial innovations.