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The globalization of angel investments: Evidence across countries

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  • Lerner, Josh
  • Schoar, Antoinette
  • Sokolinski, Stanislav
  • Wilson, Karen

Abstract

This paper examines the role of investments by angel groups across a heterogeneous set of 21 countries with varying entrepreneurship ecosystems. Exploiting quasi-random assignment of deals around the groups’ funding thresholds, we find a positive impact of funding on firm growth, performance, survival, and follow-on fundraising, which is independent of the level of venture activity and entrepreneur-friendliness in the country. However, the maturity of startups that apply for funding (and are ultimately funded) inversely correlates with the entrepreneurship-friendliness of the country. This may reflect self-censoring by early-stage firms that do not expect to receive funding in these environments.

Suggested Citation

  • Lerner, Josh & Schoar, Antoinette & Sokolinski, Stanislav & Wilson, Karen, 2018. "The globalization of angel investments: Evidence across countries," Journal of Financial Economics, Elsevier, vol. 127(1), pages 1-20.
    • Handle: RePEc:eee:jfinec:v:127:y:2018:i:1:p:1-20
    DOI: 10.1016/j.jfineco.2017.05.012
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    References listed on IDEAS

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    1. Josh Lerner & Antoinette Schoar, 2005. "Does Legal Enforcement Affect Financial Transactions? The Contractual Channel in Private Equity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 223-246.
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    3. Yael V. Hochberg & Alexander Ljungqvist & Yang Lu, 2007. "Whom You Know Matters: Venture Capital Networks and Investment Performance," Journal of Finance, American Finance Association, vol. 62(1), pages 251-301, February.
    4. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    5. Hellmann, Thomas & Thiele, Veikko, 2015. "Friends or foes? The interrelationship between angel and venture capital markets," Journal of Financial Economics, Elsevier, vol. 115(3), pages 639-653.
    6. David C. Wyld, 2010. "ASecond Lifefor organizations?: managing in the new, virtual world," Management Research Review, Emerald Group Publishing Limited, vol. 33(6), pages 529-562, May.
    7. Ji-Woong Chung & Berk A. Sensoy & Léa Stern & Michael S. Weisbach, 2012. "Pay for Performance from Future Fund Flows: The Case of Private Equity," The Review of Financial Studies, Society for Financial Studies, vol. 25(11), pages 3259-3304.
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    More about this item

    Keywords

    Contracts; Entrepreneurial finance; Venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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