The influence of functional and relational proximity on business angel investments
(2016) In International Journal of Entrepreneurship and Small Business 29(3). p.468-490- Abstract
Business angels are a vital source of capital for innovative start-up firms. However, many potentially attractive investment opportunities are rejected during the angel's decision-making process. Information asymmetry, risk and distrust in the relationship between the investor and the entrepreneur result in investment barriers. The concept of proximity has been proposed as a conceptual foundation to understand how the relationship between angel and entrepreneur hinders or benefits the investment decision. Specifically, researchers distinguish between the functional (geographic) and relational dimensions of proximity. This paper uses structural equation modelling to examine the influence of proximity on angel investments based on data... (More)
Business angels are a vital source of capital for innovative start-up firms. However, many potentially attractive investment opportunities are rejected during the angel's decision-making process. Information asymmetry, risk and distrust in the relationship between the investor and the entrepreneur result in investment barriers. The concept of proximity has been proposed as a conceptual foundation to understand how the relationship between angel and entrepreneur hinders or benefits the investment decision. Specifically, researchers distinguish between the functional (geographic) and relational dimensions of proximity. This paper uses structural equation modelling to examine the influence of proximity on angel investments based on data from 226 investment situations gathered in fall 2014 from 56 business angels and 87 entrepreneurs in Sweden. We find that the relationship between geographic proximity and the likelihood of a positive investment decision is indeed positive and significant, supporting prior research; however, it is fully mediated by relational proximity.
(Less)
- author
- Herrmann, Johannes ; Avdeitchikova, Sofia LU and Hjertström, Alexander
- publishing date
- 2016
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Business angels, Functional proximity, Investment decision, Mediation, Relational proximity, Structural equation modelling
- in
- International Journal of Entrepreneurship and Small Business
- volume
- 29
- issue
- 3
- pages
- 23 pages
- publisher
- Inderscience Publishers
- external identifiers
-
- scopus:84990046301
- ISSN
- 1476-1297
- DOI
- 10.1504/IJESB.2016.079424
- language
- English
- LU publication?
- no
- additional info
- Publisher Copyright: Copyright © 2016 Inderscience Enterprises Ltd.
- id
- 565bc2a8-6172-43da-8c0e-0882a26eae5f
- date added to LUP
- 2023-11-09 20:41:29
- date last changed
- 2023-11-10 16:48:35
@article{565bc2a8-6172-43da-8c0e-0882a26eae5f,
abstract = {{<p>Business angels are a vital source of capital for innovative start-up firms. However, many potentially attractive investment opportunities are rejected during the angel's decision-making process. Information asymmetry, risk and distrust in the relationship between the investor and the entrepreneur result in investment barriers. The concept of proximity has been proposed as a conceptual foundation to understand how the relationship between angel and entrepreneur hinders or benefits the investment decision. Specifically, researchers distinguish between the functional (geographic) and relational dimensions of proximity. This paper uses structural equation modelling to examine the influence of proximity on angel investments based on data from 226 investment situations gathered in fall 2014 from 56 business angels and 87 entrepreneurs in Sweden. We find that the relationship between geographic proximity and the likelihood of a positive investment decision is indeed positive and significant, supporting prior research; however, it is fully mediated by relational proximity.</p>}},
author = {{Herrmann, Johannes and Avdeitchikova, Sofia and Hjertström, Alexander}},
issn = {{1476-1297}},
keywords = {{Business angels; Functional proximity; Investment decision; Mediation; Relational proximity; Structural equation modelling}},
language = {{eng}},
number = {{3}},
pages = {{468--490}},
publisher = {{Inderscience Publishers}},
series = {{International Journal of Entrepreneurship and Small Business}},
title = {{The influence of functional and relational proximity on business angel investments}},
url = {{http://dx.doi.org/10.1504/IJESB.2016.079424}},
doi = {{10.1504/IJESB.2016.079424}},
volume = {{29}},
year = {{2016}},
}