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Book part
Publication date: 15 August 2007

Douglas J. Cumming

U.S. venture capital financings of U.S. entrepreneurial firms with up to 213 observations are consistent with the proposition that convertible preferred equity is the…

Abstract

U.S. venture capital financings of U.S. entrepreneurial firms with up to 213 observations are consistent with the proposition that convertible preferred equity is the optimal form of venture capital finance. This paper introduces new evidence from 208 U.S. venture capital financings of Canadian entrepreneurial firms. In contrast to U.S. venture capital investments in U.S. entrepreneurial firms, U.S. venture capitalists finance Canadian entrepreneurial firms with a variety of forms of finance. The differences between domestic and international U.S. venture capitalist financing structures are not attributable to differences in the definition of the term ‘venture capital’. The data point to the importance of institutional determinants of venture capitalist capital structures within the U.S. and abroad. Among other things, the data indicate that U.S. venture capitalists often do not choose convertible preferred shares in the absence of tax considerations in favor of that financing vehicle.

Details

Issues in Corporate Governance and Finance
Type: Book
ISBN: 978-1-84950-461-4

Article
Publication date: 15 June 2010

Wing Lam

The aim of this paper is to make sense of the “funding gap” by exploring how and why informal entrepreneurial finance is made available to entrepreneurs. By challenging…

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Abstract

Purpose

The aim of this paper is to make sense of the “funding gap” by exploring how and why informal entrepreneurial finance is made available to entrepreneurs. By challenging the epistemological and ontological assumptions of the “funding gap”, an enactment perspective of entrepreneurial finance, supported by a social constructionist stance, is proposed in this paper.

Design/methodology/approach

The study on which this paper reports was conducted through a longitudinal fieldwork process. Networks in two Chinese cities, Shanghai and Hong Kong, were chosen because of their differences in institutional context yet exceptionally high level of entrepreneurial activities.

Findings

This paper highlights the active role entrepreneurs play in managing their financial needs in the process of new venture creation. The results show that entrepreneurs are actively managing the demand as well as supply of entrepreneurial finance to narrow the “funding gap”. Furthermore, individuals work to fill the funding gap by creating required start‐up capital. In other words, the “funding gap” is not static or concrete; rather it is dynamic, manageable and in many cases is within individuals' power and ability to overcome.

Practical implications

The findings of this paper are particularly important to all stakeholders, including policy makers, educators, researchers, entrepreneurs and nascent entrepreneurs.

Originality/value

This paper contributes to the conceptual, methodological and practical knowledge in advancing understanding of the “funding gap”. First, it provides insight into the relationship between entrepreneurs and their environment that shapes the “funding gap”. Second, the findings suggested that a positive, supportive enterprise culture can be particularly useful in driving individuals towards entrepreneurship. Third, in terms of methodology, the author argues that an “inside‐looking‐lout”, interpretive, multi‐stage fieldwork and network as unit of analysis is particularly distinctive in revealing the complex process of managing entrepreneurial finance in the process of new venture creation.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 16 no. 4
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 10 October 2016

Stephanie Alexandra Macht

The purpose of this paper is to bring attention to “entrepreneurial finance education”, an aspect of entrepreneurship education that is widely taught but neglected by the…

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Abstract

Purpose

The purpose of this paper is to bring attention to “entrepreneurial finance education”, an aspect of entrepreneurship education that is widely taught but neglected by the educational literature. It does so by exploring how social capital, a key resource for entrepreneurs, can be incorporated into entrepreneurial finance education.

Design/methodology/approach

By drawing upon social capital literature in the context of funding sources for entrepreneurs, the paper highlights the significance of bonding and bridging social capital for entrepreneurial finance.

Findings

The review of relevant literature confirms the importance of social capital for entrepreneurial finance. The existence of bonding social capital, which refers to a trusting relationship between entrepreneurs and financiers, allows entrepreneurs to access their financiers’ resources (e.g. contacts, knowledge, reputation, further funds) through bridging social capital.

Practical implications

Students of entrepreneurial finance need to understand the role that both facets of social capital play in the context of fundraising. This paper proposes ways of incorporating social capital into various approaches to entrepreneurial finance education. This allows educators to include relevant topics and research into their syllabi, while enabling students to study a crucial, yet under-represented, topic in entrepreneurial finance education.

Originality/value

Given that entrepreneurial finance education has to date been neglected in the educational literature, this paper begins to address a huge void. It clarifies potential contents of entrepreneurial finance education, demonstrates the importance of including social capital in the education of entrepreneurial finance students and suggests practical ways of achieving this.

Details

Education + Training, vol. 58 no. 9
Type: Research Article
ISSN: 0040-0912

Keywords

Article
Publication date: 16 February 2022

Weiqi Dai, Yi Wang, Mingqing Liao, Mei Shao, Yue Jiang and Miao Zhang

One increasingly popular financing option for entrepreneurial ventures is to attract corporate venture capital (CVC) investments. Prior research tends to take a…

Abstract

Purpose

One increasingly popular financing option for entrepreneurial ventures is to attract corporate venture capital (CVC) investments. Prior research tends to take a CVC-centric perspective assessing the benefits and contingencies for incumbent firms or corporate investors to engage with entrepreneurial ventures. Few studies have taken the opposite perspective of investigating factors that entrepreneurial ventures need to take into account when engaging with CVC investments. As such, this study aims to investigate pre- and post-IPO entrepreneurial venture performance that partners with CVC providers or corporate investors, as well as to assess organizational and environmental contingencies.

Design/methodology/approach

This study draws on a sample of 631 entrepreneurial ventures from the CSMAR database ranging from 2009 to 2019, along with CVC financing data from the CVSource database and financial data in entrepreneurial ventures’ annual reports from the Juchao Network. This study applies multiple linear regression modelling and fixed effect panel data analyses to test the proposed hypotheses.

Findings

The results show that CVC investment contributes to entrepreneurial ventures’ financial performance, both pre- and post-IPO. However, while research and development (R&D) intensity and geographic proximity strengthen the positive relationship between CVC investment and entrepreneurial ventures’ performance pre-IPO, R&D intensity has a negative moderating effect on the relationship between CVC investment and entrepreneurial ventures’ performance post-IPO.

Practical implications

First, in emerging economies, adopting a CVC financing strategy is an important strategic choice for entrepreneurial ventures that have a great demand for external capital, resources and technology support. Second, leveraging the relationship between external financing and internal R&D investment is essential for them to maintain their core competitiveness and sustainable growth. Moreover, entrepreneurial ventures should deal with the coopetitive relationship with incumbent companies and manage their dependency on other market participants in the external environment.

Originality/value

This study focuses on the performance implications for entrepreneurial ventures engaging with CVC investments pre- and post-IPO. First, this study broadens and expands prior research on the mechanism of the relationship between CVC and entrepreneurial ventures’ financial performance. Second, the research conducts a comparative study of the moderating effects of different timings. Third, this study applies learning theory to the field of CVC in emerging economies.

Details

Journal of Entrepreneurship in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2053-4604

Keywords

Article
Publication date: 4 September 2019

Antonella Francesca Cicchiello

The purpose of this paper is to assess the role that public policies may have in re-shaping entrepreneurial ecosystems and supporting the creation of functioning…

Abstract

Purpose

The purpose of this paper is to assess the role that public policies may have in re-shaping entrepreneurial ecosystems and supporting the creation of functioning ecosystems based on new forms of finance, i.e. the equity-based crowdfunding.

Design/methodology/approach

The paper first identifies and examines the European policies developed to encourage the use of equity crowdfunding in entrepreneurial finance from 2003 to 2018. Then, it reviews national regulatory frameworks for crowdfunding, and analyses the barriers that constrain the growth of national crowdfunding markets. Finally, the paper addresses the issue of regulatory harmonisation by underlining its importance in building an entrepreneurial ecosystem based on crowdfunding.

Findings

Building an entrepreneurial ecosystem based on crowdfunding requires better policy coordination between European countries and readiness to take concerted actions. National authorities must look at the crowdfunding phenomenon from a European perspective and align their policies. European policymakers must import best practices from thriving national ecosystems by implementing less bureaucratic policies and with greater impact on entrepreneurial activity.

Social implications

In a post-crisis economy, the architecture of entrepreneurial ecosystems must evolve and focus on new financing alternatives ensuring the survival of successful businesses.

Originality/value

The paper offers a new perspective on entrepreneurship looking at the formation and development of new ecosystems around equity crowdfunding platforms. It also provides a relevant starting point for subsequent studies into this field.

Details

Journal of Entrepreneurship and Public Policy, vol. 8 no. 3
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 18 January 2008

Liang Han

Little research has been conducted on the effects of information technology on financing entrepreneurial businesses or small and medium sized enterprises (SMEs). The…

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Abstract

Purpose

Little research has been conducted on the effects of information technology on financing entrepreneurial businesses or small and medium sized enterprises (SMEs). The purpose of this paper is to examine the impacts of entrepreneurial online banking and relationship banking on the severity of financial problems perceived by entrepreneurs and their interactive effect. It also investigates how characteristics of individual businesses and entrepreneurial demographics influence SMEs' financial situation.

Design/methodology/approach

An ordered logistic model is used on a UK dataset to empirically test the hypotheses derived in this paper. The empirical evidence is drawn from the 2004 UK survey of SME finances, which contains a sample of 2,500 firms.

Findings

This paper finds that both entrepreneurial online banking behaviour and relationship banking alleviates the severity of financial problems perceived by entrepreneurs. The relationship affect is less evident for entrepreneurs who most frequently use an online approach to communicate with their banks than for those using traditional methods. Business and entrepreneur characteristics also have a strong impact on the severity of the financial problems suffered by SMEs.

Originality/value

This paper provides evidence supporting the favourable impacts of the application of information technology on entrepreneurial finance from the perspective of entrepreneur/business. It also identifies a substitute relationship between entrepreneurial online banking behaviour and relationship banking, a relationship which contradicts existing evidence.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 14 no. 1
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 23 September 2013

Douglas Cumming and Sofia Johan

– The purpose of this paper is to study factors that affect the success of technology parks in terms of fostering entrepreneurial firm formation, growth, and financing.

Abstract

Purpose

The purpose of this paper is to study factors that affect the success of technology parks in terms of fostering entrepreneurial firm formation, growth, and financing.

Design/methodology/approach

Based on a new international dataset of technology parks (tech parks) from 13 countries (eight developing countries and five developed countries), the paper relates the success of technology transfer to the legal environment within which the tech park operates, as well as the characteristics of the tenants in the tech park and the services provided by the tech park.

Findings

The data indicate entrepreneurial success is more likely to be facilitated when there is better legal protection offered to companies in the jurisdiction within which the tech park is located, when there is a greater presence of foreign university- and government-affiliated companies in tech parks, and a smaller presence of foreign private companies in tech parks, particularly foreign subsidiaries. The data further indicate entrepreneurial success is more likely when tech park tenants have greater testing/analysis focus, and when tenants have less assembly- and service-focussed activities. Also, entrepreneurial success is more likely to be facilitated by tech parks with on- and off-site technology licensing offices that promote trade shows, provide access to funds for commercialization and distribute information on the R&D outcomes of tech park tenants.

Research limitations/implications

The data offer insights into efficient design of tech parks. Coarse measures from survey data are limitations yet offer scope for further examination in future research.

Originality/value

The paper provides guidance for entrepreneurs and their investors in terms of ways maximize value in terms of entrepreneurial growth and financing from selecting appropriate tech parks.

Details

International Journal of Managerial Finance, vol. 9 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 1 June 2005

Roger Sørheim

The main aim of this article is to widen one's understanding of the value‐added contributions of business angels and, more specifically, their role as facilitators for…

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Abstract

Purpose

The main aim of this article is to widen one's understanding of the value‐added contributions of business angels and, more specifically, their role as facilitators for further finance.

Design/methodology/approach

This article is based on in‐depth case studies of five experienced business angels. Data were collected by using a loosely structured interview guide which focused on the investment process.

Findings

Business angels add value besides the initial financial capital offered, typically in the form of strategic advice and networking. However, previous research has to a small extent examined the role of business angels as facilitators for further finance. The empirical findings in this study indicate that experienced business angels play a key role in order to facilitate further finance. Furthermore, entrepreneurs should bear in mind that the previous track record of the business angel strongly affects if and how they can facilitate further finance. Thus, active business angels can be viewed as a part of the entrepreneurial team, hence reducing the “liability of newness” for the entrepreneurial firm.

Research limitations/implications

Future research should continue to examine business angels by using insight from social capital theory. Moreover, by using larger samples the findings from this exploratory study can be tested, thus getting more reliable results to extend one's knowledge about how business angels act as facilitators for further finance.

Originality/value

This study suggests that concepts from social capital theory seem to be viable when examining how business angels work when they are securing further finance for their portfolio firms.

Details

Journal of Small Business and Enterprise Development, vol. 12 no. 2
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 23 February 2021

Navjot Sandhu and Javed Hussain

This paper investigates the mediating role of access to finance and entrepreneurial education for small and marginal farmers (SMFs) in the Indian northern state of Punjab…

Abstract

Purpose

This paper investigates the mediating role of access to finance and entrepreneurial education for small and marginal farmers (SMFs) in the Indian northern state of Punjab. Furthermore, it examines the inter-mediatory role of entrepreneurs and the access to finance in the promotion of innovation, development and consequently poverty alleviation.

Design/methodology/approach

To gain a deeper insight, we used a purposive sampling technique, involving in-depth, face-to-face interviews based on a semi-structured questionnaire amongst 185 farmers from the state of the Punjab in India. The combination of open ended and dichotomous questions amenable to the Likert scale, captured responses and the transcribed questionnaires were thematically analysed.

Findings

Using the analysis of the quantitative and qualitative responses, we explain the cause and consequences of the finance gap and the impact of poverty on household income and the debt levels of SMFs. The findings suggest that the expanding pool of SMFs is due to land ownership fragmentation that disenfranchises SMFs from accessing adequate finance thus limiting their ability to adapt to technological innovations, and therefore limiting their productivity and growth. This essentially limits their ability to transform their economic and social wellbeing. The findings from the data analysis suggest a lack of access to finance negatively impacts on SMFs' ability to use innovative practices, technologies and productivity. This adversely affects income level, access to education and social goods to propel them out of poverty. The findings advocate that government policy should focus on land reforms, which provide adequate access to finance to enable the adaption of technology and an access to markets to empower marginal farmers.

Research limitations/implications

Land fragmentation resulting with population growth in emerging economies continuously expands SMFs. To improve efficiency, productivity and entrepreneurial traits amongst SMFs, it is a pre-requisite to have an agile economy. However, in emerging economies such as India, the responses of 185 farmers suggest, a bespoke policy to promote the interest of SMFs through enabling them access to finance, technologies, training and education, continues to prove elusive. This novel empirical research provides evidence that demands that policymakers, commercial institutions and donors need to respond to the needs of SMFs to ensure food security and an optimal utilisation of farmland. The limitation of this research is that the sample is from one country, which limits its generalisation. The findings of this study could be enhanced by conducting comparative studies in other regions or economies.

Originality/value

This empirical study examined the barriers to enterprise for SMFs in the Indian Punjab; it examined the causes and consequences and the implications for food security for India. The findings of this study highlight the importance of developing the entrepreneurial capabilities of SMFs through effective education, training and above all through an adequate access to finance to enable them to adapt their technology. Furthermore, the findings make a case as to why SMFs are an integral part of the food chain and why it is necessary to enhance their efficiency, productivity and their access to finance.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 27 no. 6
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 18 November 2019

Matteo Rossi, Giuseppe Festa, Fabio Fiano and Rosa Giacobbe

Recently, corporate venture capital (CVC) has been gaining increasing attention worldwide as a special form of venturing through which non-financial corporations invest in…

Abstract

Purpose

Recently, corporate venture capital (CVC) has been gaining increasing attention worldwide as a special form of venturing through which non-financial corporations invest in target companies, usually technological firms, as start-ups. These investments mostly aim not at financial goals but constitute a strategic way for the corporation to obtain access to new technologies and innovations through financing entrepreneurial initiatives. The purpose of this paper is to analyze the connections between the core business of the parent company and its venturing investments, investigating, in particular, its “ambidexterity,” i.e., the ability of the CVC company to invest in ventures close to its core activities, exploiting internal resources and exploring new markets.

Design/methodology/approach

Stemming from the results of previous studies, this research has applied a discriminating analysis methodology to the 18 most active CVC companies in the world, all of which have technology innovation as the core business of the corporation, in the 2015/2017 period.

Findings

An evident correlation between the Financing Round (as the independent variable) and the Entrepreneurial Intensity (as the dependent variable) influences the CVCs investment policies and their behavior with respect to their ambidexterity. This link could also influence the strategic orientation of the CVC policy, forcing the company to appropriately govern and manage the starting nature and/or the variable nature of the CVC (ambidextrous, hybrid, dis-ambidextrous or random).

Research limitations/implications

The current research has used only secondary data to explore the behavior of only 18 CVCs in a relatively short period. Thus, it would be advisable to extend the number of observations, to enlarge the period under investigation, and to retrieve field data to obtain more detailed and reliable results.

Originality/value

The main objective/contribution of this study is to understand if there is a correlation between the Financing Round (as the independent variable) and the Entrepreneurial Intensity (as the dependent variable) for the 18 most active CVCs in the world, according to CB Insights, in 2015–2017, adopting and further confirming the model by Rossi et al. (2019). The statistical investigation, based on the conclusions of that linear regression model, has highlighted a total or large correlation between these two variables for the current research perimeter, which includes CVC companies with technology as the core business of the corporation.

Details

Business Process Management Journal, vol. 26 no. 5
Type: Research Article
ISSN: 1463-7154

Keywords

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