The current global financial crisis is difficult for small firms. Small firms face contraction of credit from banks, which affects their future investments adversely. On the equity angle, there is a general lack of trust from investors due to increasing uncertainties every day. Therefore, investment in future projects using either debt or equity becomes difficult for small businesses in general.
While small firms face these difficulties, the New York Times (Flanigan, 2008) recently reported that entrepreneurs with innovative ideas and technologies do not face a funding gap even during the current crisis. There seems to be some hope among investors on the potential of innovations and the individuals who bring these to the market. One entrepreneur stated that in this crisis “companies cant raise debt so there are opportunities for equity investment.” This investment, in his opinion, will be in areas where new technologies are constantly evolving. In short, the New York Times calls it the “entrepreneurial edge,” which involves the innovative idea and the individual.
KeywordsPublic Choice Capital Structure Innovative Activity Innovative Idea Nascent Entrepreneur
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