Financing Entrepreneurial Firms in Europe: Facts, Issues, and Research Agenda

Abstract:     
Since the 1980s, a gap has existed between U.S. firms and European firms in their ability to compete in high-tech markets and knowledge-based economies.However, the late 1990s saw many changes that have impacted and transformed the prospects of European entrepreneurial firms.These changes include the following:the introduction of the euro; the significant increase in venture capital financing in most European Union (EU) countries; the creation of new equity markets that specifically targeted firm innovation; and policy changes regarding the financing of entrepreneurial firms. Previous literature and facts regarding the state of Europe's entrepreneurial activity is presented, including a description of the markets of Nouveau Marché (Paris), the Neuer Markt (Frankfurt), and the Nuovo Mercato (Milan).The impact of the aforementioned changes on entrepreneurial financing is discussed, with the discussion including descriptions of European IPOs and the impact of venture capital on corporate growth and employment. Using this information, a research agenda is created to address the role of public policy in shaping the motivations for entrepreneurs, venture capitalists, and investors.The impact of barriers to entrepreneurship, cross-country differences, and taxation are among the factors investigated.The influence of public policy on entrepreneurial development is discussed and areas for future research are suggested. (AKP)

Keywords: Neuer Markt, Experimental/primary research, Bibliography/review article, Entrepreneurial activity, Nouveau Marche, Nuovo Mercato, Barriers to growth, Tax policies, Stock markets, Public policies, Financing, Venture capital, Firm growth, Economic development, Initial public offerings (IPOs)

Accepted Paper Series