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Determinants of long-distance investing by business angels in the UK

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  • Richard Harrison
  • Colin Mason
  • Paul Robson

Abstract

The business angel market is usually identified as a local market, and the proximity of an investment has been shown to be key in the angel's investment preferences and an important filter at the screening stage of the investment decision. This is generally explained by the personal and localized networks used to identify potential investments, the hands-on involvement of the investor and the desire to minimize risk. However, a significant minority of investments are long distance. This paper is based on data from 373 investments made by 109 UK business angels. We classify the location of investments into three groups: local investments (those made within the same county or in adjacent counties); intermediate investments (those made in counties adjacent to the ‘local’ counties); and long-distance investments (those made beyond this range). Using ordered logit analysis the paper develops and tests a number of hypotheses that relate long-distance investment to investment characteristics and investor characteristics. The paper concludes by drawing out the implications for entrepreneurs seeking business angel finance in investment-deficient regions, business angel networks seeking to match investors to entrepreneurs and firms (which are normally their primary clients), and for policy-makers responsible for local and regional economic development.

Suggested Citation

  • Richard Harrison & Colin Mason & Paul Robson, 2010. "Determinants of long-distance investing by business angels in the UK," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 22(2), pages 113-137, March.
    • Handle: RePEc:taf:entreg:v:22:y:2010:i:2:p:113-137
    DOI: 10.1080/08985620802545928
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    References listed on IDEAS

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    1. Michael Fritsch & Dirk Schilder, 2008. "Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation," Environment and Planning A, , vol. 40(9), pages 2114-2131, September.
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    2. Batabyal, Amitrajeet A., 2012. "Project financing, entrepreneurial activity, and investment in the presence of asymmetric information," The North American Journal of Economics and Finance, Elsevier, vol. 23(1), pages 115-122.
    3. Hoyos Iruarrizaga, Jon & Saiz Santos, María, 2013. "The informal investment context: specific issues concerned with business angels," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 26, pages 179-198.
    4. Colin Mason, 2010. "Entrepreneurial finance in a regional economy," Venture Capital, Taylor & Francis Journals, vol. 12(3), pages 167-172, July.
    5. Lars Hornuf & Matthias Schmitt & Eliza Stenzhorn, 2020. "Does a Local Bias Exist in Equity Crowdfunding?," CESifo Working Paper Series 8154, CESifo.
    6. Alexandra Moritz & Joern H. Block & Andreas Heinz, 2016. "Financing patterns of European SMEs -- an empirical taxonomy," Venture Capital, Taylor & Francis Journals, vol. 18(2), pages 115-148, April.
    7. Ross Brown & Colin Mason, 2017. "Looking inside the spiky bits: a critical review and conceptualisation of entrepreneurial ecosystems," Small Business Economics, Springer, vol. 49(1), pages 11-30, June.
    8. Clarysse, Bart & Wright, Mike & Bruneel, Johan & Mahajan, Aarti, 2014. "Creating value in ecosystems: Crossing the chasm between knowledge and business ecosystems," Research Policy, Elsevier, vol. 43(7), pages 1164-1176.
    9. Ali-Yrkkö, Jyrki & Pajarinen, Mika & Ylhäinen, Ilkka, 2019. "Business Angel Investment, Public Innovation Funding and Firm Growth," ETLA Reports 97, The Research Institute of the Finnish Economy.
    10. Harrison, Richard T. & Bock, Adam J. & Gregson, Geoff, 2020. "Stairway to heaven? rethinking angel investment policy and practice," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    11. Johannes Wallmeroth & Peter Wirtz & Alexander Peter Groh, 2017. "Institutional Seed Financing, Angel Financing, and Crowdfunding of Entrepreneurial Ventures: A Literature Review," Working Papers hal-01527999, HAL.
    12. Marc Cowling & Ross Brown & Neil Lee, 2021. "The geography of business angel investments in the UK: Does local bias (still) matter?," Environment and Planning A, , vol. 53(5), pages 1180-1200, August.
    13. Y. Song & Octavio Escobar & U. Arzubiaga & A. de Massis, 2022. "The Digital Transformation of a Traditional Market into an Entrepreneurial Ecosystem," Post-Print hal-04435629, HAL.
    14. Vanessa Diaz-Moriana & Colm O’Gorman, 2013. "Informal Investors and the Informal Venture Capital Market in Ireland," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 3(6), pages 630-643, June.
    15. Györfy Lehel & Madaras Szilárd, 2020. "Influencing Factors of the Informal Investment in Central Europe," Economics and Business, Sciendo, vol. 34(1), pages 78-91, February.
    16. Croce, Annalisa & Schwienbacher, Armin & Ughetto, Elisa, 2023. "Internationalization of business angel investments: The role of investor experience," International Business Review, Elsevier, vol. 32(1).
    17. Butticè, Vincenzo & Croce, Annalisa & Ughetto, Elisa, 2021. "Network dynamics in business angel group investment decisions," Journal of Corporate Finance, Elsevier, vol. 66(C).
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    19. Christina Guenther & Sofia Johan & Denis Schweizer, 2018. "Is the crowd sensitive to distance?—how investment decisions differ by investor type," Small Business Economics, Springer, vol. 50(2), pages 289-305, February.

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