Seeding New Ventures - Green Thumbs and Fertile Fields: Individual and Environmental Drivers of Informal Investment

46 Pages Posted: 18 Oct 2007

See all articles by László Szerb

László Szerb

University of Pécs

Siri A. Terjesen

Norwegian School of Economics (NHH); American University

Gábor Rappai

University of Pecs

Date Written: July 2, 2007

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.

Keywords: informal investment, individual drivers, environmental drivers, entrepreneurial careers, business ownership, new venture financing

JEL Classification: L26, E22, M13, N2

Suggested Citation

Szerb, Laszlo and Terjesen, Siri A. and Rappai, Gábor, Seeding New Ventures - Green Thumbs and Fertile Fields: Individual and Environmental Drivers of Informal Investment (July 2, 2007). Jena Economic Research Paper No. 2007-030. Available at SSRN: https://ssrn.com/abstract=1021164 or http://dx.doi.org/10.2139/ssrn.1021164

Laszlo Szerb (Contact Author)

University of Pécs ( email )

Rákóczi st. 80
Pécs, 7622
Hungary

HOME PAGE: http://ktk.pte.hu/en/department-quantitative-management/laszlo-szerb

Siri A. Terjesen

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

American University ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States

Gábor Rappai

University of Pecs ( email )

Rakoczi 80
Pecs, 7622
Hungary

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