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What Drives Micro-Angel Investments?

Author

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  • Markku Maula
  • Erkko Autio
  • Pia Arenius

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. Copyright Springer 2005

Suggested Citation

  • Markku Maula & Erkko Autio & Pia Arenius, 2005. "What Drives Micro-Angel Investments?," Small Business Economics, Springer, vol. 25(5), pages 459-475, December.
    • Handle: RePEc:kap:sbusec:v:25:y:2005:i:5:p:459-475
    DOI: 10.1007/s11187-004-2278-4
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    References listed on IDEAS

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    1. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Chapters, in: Tax Policy and the Economy, Volume 3, pages 47-68, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    household portfolios; informal venture capital; theory of planned behavior; G24; G28; M13; D14;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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