IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/69545.html
   My bibliography  Save this paper

When Entrepreneurs Meet Financiers: Evidence from the Business Angel Market

Author

Listed:
  • Angela, Cipollone
  • Paolo E., Giordani

Abstract

This paper estimates the process of search and matching between entrepreneurs and financiers in the business angel (BA) market. We hand-collect a new dataset from the BA markets of 17 developed countries for the period 1996-2014, and we estimate the aggregate matching function, which captures the number of successful deals as a function of the number of potential entrepreneurs and of business angels. Empirical findings confirm the technological features assumed in the theoretical literature: positive and decreasing marginal returns to both inputs (stepping on toes effect), technological complementarity across the two inputs (thick market effect) and constant returns to scale (CRS). As we show, evidence on CRS rules out equilibrium multiplicity in the BA market. We discuss the policy implications of these findings.

Suggested Citation

  • Angela, Cipollone & Paolo E., Giordani, 2016. "When Entrepreneurs Meet Financiers: Evidence from the Business Angel Market," MPRA Paper 69545, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69545
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/69545/1/MPRA_paper_69545.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel Borowczyk-Martins & Gregory Jolivet & Fabien Postel-Vinay, 2013. "Accounting For Endogeneity in Matching Function Estimation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 440-451, July.
    2. Jonathan Chiu & Cesaire Meh & Randall Wright, 2017. "Innovation And Growth With Financial, And Other, Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 95-125, February.
    3. Keuschnigg, Christian, 2003. "Optimal Public Policy for Venture Capital Backed Innovation," CEPR Discussion Papers 3850, C.E.P.R. Discussion Papers.
    4. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    5. repec:hal:spmain:info:hdl:2441/4l136f59vb8mcalu5p6p5li007 is not listed on IDEAS
    6. Diamond, Peter A, 1984. "Money in Search Equilibrium," Econometrica, Econometric Society, vol. 52(1), pages 1-20, January.
    7. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355, March.
    8. Etienne Wasmer & Philippe Weil, 2004. "The Macroeconomics of Labor and Credit Market Imperfections," American Economic Review, American Economic Association, vol. 94(4), pages 944-963, September.
    9. Philippe Weil & Etienne Wasmer, 2004. "The macroeconomics of credit and labor market imperfections," ULB Institutional Repository 2013/13436, ULB -- Universite Libre de Bruxelles.
    10. Cipollone, Angela & Giordani, Paolo E., 2019. "Market frictions in entrepreneurial innovation: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 297-331.
    11. Claudio Michelacci & Javier Suarez, 2004. "Business Creation and the Stock Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 459-481.
    12. Christian Keuschnigg, 2003. "Public Policy and Venture Capital Backed Innovation," CESifo Working Paper Series 1066, CESifo.
    13. Thomas J. Chemmanur & Paolo Fulghieri, 2014. "Entrepreneurial Finance and Innovation: An Introduction and Agenda for Future Research," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 1-19, January.
    14. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-597, November.
    15. Robin Boadway & Oana Secrieru & Marianne Vigneault, 2005. "A Search Model of Venture Capital, Entrepreneurship, and Unemployment," Staff Working Papers 05-24, Bank of Canada.
    16. van Ours, J. C. & Burdett, K. & Coles, M., 1994. "Temporal Aggregation Bias in Stock-Flow Models," Other publications TiSEM 993a7da0-0d67-4900-b529-6, Tilburg University, School of Economics and Management.
    17. Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2005. "Returns to scale in a matching model: evidence from disaggregated panel data," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 115-118.
    18. Inderst, Roman & Muller, Holger M., 2004. "The effect of capital market characteristics on the value of start-up firms," Journal of Financial Economics, Elsevier, vol. 72(2), pages 319-356, May.
    19. Josh Lerner, 2010. "The future of public efforts to boost entrepreneurship and venture capital," Small Business Economics, Springer, vol. 35(3), pages 255-264, October.
    20. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    21. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521899604, March.
    22. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    23. William R. Kerr & Josh Lerner & Antoinette Schoar, 2014. "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 20-55, January.
    24. Rafael Silveira & Randall Wright, 2016. "Venture Capital: A Model of Search and Bargaining," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 232-246, January.
    25. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    26. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    27. Silveira, Rafael & Wright, Randall, 2010. "Search and the market for ideas," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1550-1573, July.
    28. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
    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. Constantin Anghelache & Radu Titus MARINESCU & Bodo Gyorgy & Ihab Jweida S J JWEIDA & Andreea-Ioana MARINESCU, 2016. "The Role of Information to Market Study," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(9), pages 100-112, September.
    2. Gabriela Victoria ANGHELACHE & Madalina – Gabriela Anghel & Daniel DUMITRESCU & Marius POPOVICI, 2016. "The International Framework of macro-prudential Supervision of Financial-Banking Markets," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(5), pages 73-78, May.
    3. Marc Cowling & Ross Brown & Neil Lee, 2021. "The geography of business angel investments in the UK: Does local bias (still) matter?," Environment and Planning A, , vol. 53(5), pages 1180-1200, August.
    4. Parker, Simon C., 2020. "Editorial: On submitting economics articles to JBV," Journal of Business Venturing, Elsevier, vol. 35(4).
    5. Engineer, Merwan H. & Schure, Paul & Vo, Dan H., 2019. "Hide and seek search: Why angels hide and entrepreneurs seek," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 523-540.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cipollone, Angela & Giordani, Paolo E., 2019. "Entrepreneurs meet financiers: Evidence from the business angel market," Journal of Business Venturing, Elsevier, vol. 34(5), pages 1-1.
    2. Cipollone, Angela & Giordani, Paolo E., 2019. "Market frictions in entrepreneurial innovation: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 297-331.
    3. Angela Cipollone & Paolo E. Giordani, 2012. "Animal Spirits in Entrepreneurial Innovation: Theory and Evidence," Working Papers CELEG 1201, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    4. Paolo Giordani, 2015. "Entrepreneurial finance and economic growth," Journal of Economics, Springer, vol. 115(2), pages 153-174, June.
    5. Barbara Petrongolo & Christopher Pissarides, 2006. "Scale Effects in Markets with Search," Economic Journal, Royal Economic Society, vol. 116(508), pages 21-44, January.
    6. Petrosky-Nadeau, Nicolas & Wasmer, Etienne, 2015. "Macroeconomic dynamics in a model of goods, labor, and credit market frictions," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 97-113.
    7. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h481l2tb5 is not listed on IDEAS
    8. Sanna‐Mari Hynninen & Aki Kangasharju & Jaakko Pehkonen, 2009. "Matching Inefficiencies, Regional Disparities, and Unemployment," LABOUR, CEIS, vol. 23(3), pages 481-506, September.
    9. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    10. Tsasa, Jean-Paul K., 2022. "Labor market volatility in a fully specified RBC search model: An analytical investigation," Journal of Mathematical Economics, Elsevier, vol. 103(C).
    11. repec:hal:spmain:info:hdl:2441/1787nsa6d1927a90u4bkkombn4 is not listed on IDEAS
    12. Masaru Sasaki & Miki Kohara & Tomohiro Machikita, 2013. "Measuring Search Frictions Using Japanese Microdata," The Japanese Economic Review, Japanese Economic Association, vol. 64(4), pages 431-451, December.
    13. Stops Michael & Mazzoni Thomas, 2010. "Matchingprozesse auf beruflichen Teilarbeitsmärkten / Job Matching on Occupational Labour Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 287-312, June.
    14. repec:hal:spmain:info:hdl:2441/5por5bt92h8l0bc7ls4elmcc0b is not listed on IDEAS
    15. repec:hal:wpspec:info:hdl:2441/1787nsa6d1927a90u4bkkombn4 is not listed on IDEAS
    16. Mikko Moilanen, 2010. "Matching and settlement patterns: The case of Norway," Papers in Regional Science, Wiley Blackwell, vol. 89(3), pages 607-623, August.
    17. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    18. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h48226q18 is not listed on IDEAS
    19. Hyytinen, Ari & Takalo, Tuomas, 2008. "Investor protection and business creation," International Review of Law and Economics, Elsevier, vol. 28(2), pages 113-122, June.
    20. Aomar Ibourk & Bénédicte Maillard & Sergio Perelman & Henri Sneessens, 2004. "Aggregate Matching Efficiency: A Stochastic Production Frontier Approach, France 1990–1994," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 31(1), pages 1-25, March.
    21. Engineer, Merwan H. & Schure, Paul & Vo, Dan H., 2019. "Hide and seek search: Why angels hide and entrepreneurs seek," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 523-540.
    22. Nicolas Petrosky-Nadeau & Etienne Wasmer, 2013. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 193-221, January.
    23. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
    24. Becsi, Zsolt & Li, Victor E. & Wang, Ping, 2013. "Credit mismatch and breakdown," European Economic Review, Elsevier, vol. 59(C), pages 109-125.
    25. Robin Boadway & Oana Secrieru & Marianne Vigneault, 2005. "A Search Model of Venture Capital, Entrepreneurship, and Unemployment," Staff Working Papers 05-24, Bank of Canada.

    More about this item

    Keywords

    Entrepreneurial finance; innovation; matching function; business angels.;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:69545. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.