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Venture Capital, Entrepreneurship and Regional Development: The Role of Informal Venture Capital

In: Inward Investment, Business Finance and Regional Development

Author

Listed:
  • Colin M. Mason
  • Richard T. Harrison

Abstract

Almost by definition, growing firms not only outstrip their internally generated capital from retained earnings, but also the willingness and ability of their owner-managers to incur greater risk by increasing their equity investment from their own personal capital. Growth on a secure footing therefore requires an investment of ‘permanent’ capital, whether equity or long-term debt, from an external source. Recourse to a stock exchange quotation is not feasible for the vast majority of small, growing firms because of the transaction costs involved in raising new equity capital and the compliance costs (legal and reporting requirements) of a public quotation, both of which discriminate against smaller issues. Consequently the ability of small and medium-sized enterprises (SMEs) to achieve and maintain growth depends on the willingness of banks to make long-term loans or venture capital firms to provide equity finance.

Suggested Citation

  • Colin M. Mason & Richard T. Harrison, 1998. "Venture Capital, Entrepreneurship and Regional Development: The Role of Informal Venture Capital," Palgrave Macmillan Books, in: Stephen Hill & Brian Morgan (ed.), Inward Investment, Business Finance and Regional Development, chapter 9, pages 153-169, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-14181-4_10
    DOI: 10.1007/978-1-349-14181-4_10
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