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What Drives Micro-Angel Investments?

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Abstract

Despite of the significant role of informal venture capital in the financing of new entrepreneurial ventures, there is little research explaining the factors determining the propensity of individuals to make microangel investments. Building on two theoretical frameworks, a social psychological theory of planned behavior and an economic theory on the determinants of demand for risky assets in household portfolios, we develop a set of hypotheses predicting the propensity of individuals to make informal investments in new businesses owned by others. In our analysis we test whether the determinants of micro-angel investments are similar when investing in a business owned by a close family member versus more distant business. The hypotheses are tested using data from 6007 interviews of Finnish adults carried out in the Global Entrepreneurship Monitor program in 2000–2002. The findings show that the theoretical frameworks have more power in explaining investments in firms not owned by close family members. The study provides new understanding of the differences in the drivers of different types of micro-angel investments.

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Authors and Affiliations

  1. Helsinki University of Technology, P.O. Box 5500, FIN-02015 HUT, Finland

    Markku Maula

  2. HEC Université de Lausanne BFSH1, Lausanne-Dorigny, 1015, Switzerland

    Erkko Autio

  3. HEC Lausanne BFSH1, 1015, Lausanne-Dorigny, Switzerland

    Pia Arenius

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  1. Markku Maula
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  2. Erkko Autio
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  3. Pia Arenius
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Correspondence to Markku Maula.

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Maula, M., Autio, E. & Arenius, P. What Drives Micro-Angel Investments?. Small Bus Econ 25, 459–475 (2005). https://doi.org/10.1007/s11187-004-2278-4

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