IDEAS home Printed from https://ideas.repec.org/a/taf/veecee/v9y2007i4p257-284.html
   My bibliography  Save this article

Seeding new ventures -- green thumbs and fertile fields: Individual and environmental drivers of informal investment

Author

Listed:
  • László Szerb
  • Siri Terjesen
  • Gábor Rappai

Abstract

This study explores individual and country level environmental drivers of informal ‘seed’ investment. We examine four types of informal investors based on business ownership experience (or no such experience) and close family relationship with investee (or no such relationship): ‘classic love money’, ‘outsider’, ‘kin owner’ and ‘classic business angel’ investors. At the environmental level, we are interested in the role of economic development, income tax policies, start-up costs, pro-enterprise government programmes, availability of debt financing, entrepreneurship education and culture. Using Global Entrepreneurship Monitor data from telephone interviews with 257 793 individuals in 31 countries, including 5 960 informal investors, we report drivers for the four types of seed investment. Descriptive statistics are consistent with prior research: informal investors are likely to be older males who work full-time, earn high incomes, perceive start-up opportunities in the environment, and believe that they have the skills to start their own businesses. At the environmental level, we find that countries with higher percentages of informal investors are significantly likely to have higher levels of economic development, higher business start-up costs, higher levels of entrepreneurship education, lower income taxes and lower power distance. Other environmental effects on the four populations of informal investors are reported and discussed, as well as implications for practice, policy and future research.

Suggested Citation

  • László Szerb & Siri Terjesen & Gábor Rappai, 2007. "Seeding new ventures -- green thumbs and fertile fields: Individual and environmental drivers of informal investment," Venture Capital, Taylor & Francis Journals, vol. 9(4), pages 257-284, April.
  • Handle: RePEc:taf:veecee:v:9:y:2007:i:4:p:257-284
    DOI: 10.1080/13691060701414949
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13691060701414949
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    2. André Stel & Martin Carree & Roy Thurik, 2005. "The Effect of Entrepreneurial Activity on National Economic Growth," Small Business Economics, Springer, vol. 24(3), pages 311-321, February.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    5. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2004. "Business environment and firm entry : Evidence from international data," Policy Research Working Paper Series 3232, The World Bank.
    6. Luigi Guiso & Michael Haliassos & Tullio Jappelli, 2003. "Household stockholding in Europe: where do we stand and where do we go?," Economic Policy, CEPR;CES;MSH, vol. 18(36), pages 123-170, April.
    7. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-690, September.
    8. Zoltán Ács & Attila Varga, 2005. "Entrepreneurship, Agglomeration and Technological Change," Small Business Economics, Springer, vol. 24(3), pages 323-334, February.
    9. William Bygrave & Michael Hay & Emily Ng & Paul Reynolds, 2003. "Executive forum: A study of informal investing in 29 nations composing the Global Entrepreneurship Monitor," Venture Capital, Taylor & Francis Journals, vol. 5(2), pages 101-116, April.
    10. Richard T. Harrison & Colin M. Mason, 2000. "Venture capital market complementarities: The links between business angels and venture capital funds in the United Kingdom," Venture Capital, Taylor & Francis Journals, vol. 2(3), pages 223-242, July.
    11. Richard T. Harrison & Colin M. Mason & Paul Girling, 2004. "Financial bootstrapping and venture development in the software industry," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 16(4), pages 307-333, July.
    12. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    13. Robert Wiltbank, 2005. "Investment practices and outcomesof informal venture investors," Venture Capital, Taylor & Francis Journals, vol. 7(4), pages 343-357, August.
    14. Poh Kam Wong & Yuen Ping Ho, 2006. "Characteristics and determinants of informal investment in Singapore," Venture Capital, Taylor & Francis Journals, vol. 9(1), pages 43-70, June.
    15. Arthur, Michael B. & Rousseau, Denise M. (ed.), 1996. "The Boundaryless Career: A New Employment Principle for a New Organizational Era," OUP Catalogue, Oxford University Press, number 9780195100143.
    16. Markku Maula & Erkko Autio & Pia Arenius, 2005. "What Drives Micro-Angel Investments?," Small Business Economics, Springer, vol. 25(5), pages 459-475, December.
    17. Alf SæTRE, 2003. "Entrepreneurial perspectives on informal venture capital," Venture Capital, Taylor & Francis Journals, vol. 5(1), pages 71-94, January.
    18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    19. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    20. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    21. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
    22. Heiko Bergmann & Rolf Sternberg, 2007. "The Changing Face of Entrepreneurship in Germany," Small Business Economics, Springer, vol. 28(2), pages 205-221, March.
    23. Yuen Ping Ho & Poh Kam Wong, 2005. "Availability of Financing, Regulatory Business Costs and National Entrepreneurial Propensity," Industrial Organization 0504025, EconWPA, revised 03 Aug 2005.
    24. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Szerb, László & Bugár, Gyöngyi, 2015. "Informális befektetési hajlandóság és döntéshozatal a magyar lakosság körében
      [The propensity for informal investment and investment decision-making in Hungary]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 356-378.
    2. repec:now:fntent:0300000051 is not listed on IDEAS
    3. André van Stel & Kashifa Suddle & Andrew Burke & Chantal Hartog, 2008. "How does Entrepreneurial Activity Affect the Supply of Business Angels?," Scales Research Reports H200813, EIM Business and Policy Research.
    4. Sander Wennekers & Jolanda Hessels & Chantal Hartog, 2009. "Global Entrepreneurship Monitor 2008 The Netherlands," Scales Research Reports A200914, EIM Business and Policy Research.
    5. repec:eee:rensus:v:77:y:2017:i:c:p:525-535 is not listed on IDEAS
    6. Siri Terjesen & Jolanda Hessels, 2009. "Varieties of export-oriented entrepreneurship in Asia," Asia Pacific Journal of Management, Springer, vol. 26(3), pages 537-561, September.

    More about this item

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • N2 - Economic History - - Financial Markets and Institutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:veecee:v:9:y:2007:i:4:p:257-284. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/TVEC20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.