For Love or Money? A Study of Financial Returns on Informal Investments in Businesses Owned by Relatives, Friends, and Strangers

REGIONAL FRONTIERS OF ENTREPRENEURSHIP RESEARCH, L.M. Gillin, ed., Melbourne: Swinburne University, 2007

Presented at the AGSE Entrepreneurship Research Conference, Queensland University of Technology, Brisbane, Australia, February 2007

Babson College Center for Entrepreneurship Research Paper No. 2008-09

15 Pages Posted: 31 Oct 2008

See all articles by William D. Bygrave

William D. Bygrave

Babson College - Arthur M. Blank Center for Entrepreneurship

Stephen Hunt

London Business School

Date Written: September, 17 2008

Abstract

Agency and altruism theory are combined to develop a framework for explaining expected returns on informal investments in 35 countries that participated in the Global Entrepreneurship Monitor (GEM) in 2004 and 2005. The principal finding is that altruism affects expected returns. Expected returns increase as the relationship distance between the investor and the entrepreneur increases; men expect higher returns than women; entrepreneurs expect higher returns than non-entrepreneurs; expected returns increase as the amount invested increases; old persons expect lower returns than young ones; entrepreneurs expect higher returns on investments in their own businesses than on their investments in others' businesses.

Keywords: Agency theory, Altruism, Informal Investor, Angel, Returns, Payback, 3F, GEM, Entrepreneur

JEL Classification: M13

Suggested Citation

Bygrave, William D. and Hunt, Stephen, For Love or Money? A Study of Financial Returns on Informal Investments in Businesses Owned by Relatives, Friends, and Strangers (September, 17 2008). REGIONAL FRONTIERS OF ENTREPRENEURSHIP RESEARCH, L.M. Gillin, ed., Melbourne: Swinburne University, 2007; Presented at the AGSE Entrepreneurship Research Conference, Queensland University of Technology, Brisbane, Australia, February 2007 ; Babson College Center for Entrepreneurship Research Paper No. 2008-09. Available at SSRN: https://ssrn.com/abstract=1269442

William D. Bygrave (Contact Author)

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

231 Forest Street
Babson Park, MA 02457-0310
United States

Stephen Hunt

London Business School

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
281
Abstract Views
1,278
rank
107,551
PlumX Metrics