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Do institutions matter for business angel investing in emerging Asian markets?

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  • William Scheela
  • Thawatchai Jittrapanun

Abstract

We report on business angel (BA) investing in the emerging Asian economy of Thailand. Our research question is: How can BAs survive in an emerging economy, which lacks the fully developed institutions that are necessary to support formal and informal venture capital investing? Institutional theory was used as the framework to expand BA research to an emerging economy. We interviewed 20 Thai Chinese BA investors in 2006 and 2007, and studied their investment strategies. We adopted a mixed-methods research design to analyze the data. Results indicate that the BAs find it a challenge to invest in and operate new ventures in a highly uncertain and competitive environment where there is high political uncertainty, weak legal and financial support for investors and inefficient government support for small- and medium-sized enterprises. In spite of these challenges, BAs generally report strong investment returns. To overcome weak institutional support (institutional void), BA investors develop informal institutions by co-investing and networking with family members and government officials. They also conduct in-depth due diligence before investing and closely monitor their investee companies after investing.

Suggested Citation

  • William Scheela & Thawatchai Jittrapanun, 2012. "Do institutions matter for business angel investing in emerging Asian markets?," Venture Capital, Taylor & Francis Journals, vol. 14(4), pages 289-308, October.
    • Handle: RePEc:taf:veecee:v:14:y:2012:i:4:p:289-308
    DOI: 10.1080/13691066.2012.672020
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    Cited by:

    1. Richard Harrison & William Scheela & P. C. Lai & Sivapalan Vivekarajah, 2018. "Beyond institutional voids and the middle-income trap: The emerging business angel market in Malaysia," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 965-991, December.
    2. Solodoha, Eliran & Rosenzweig, Stav & Harel, Shai, 2023. "Incentivizing angels to invest in start-ups: Evidence from a natural experiment," Research Policy, Elsevier, vol. 52(1).
    3. Zhou, Lu Jolly & Zhang, Xinyu & Sha, Yezhou, 2021. "The role of angel investment for technology-based SMEs: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    4. Fernandez, Viviana, 2024. "Micro-angel investments of men and women: The role of institutions," Research in International Business and Finance, Elsevier, vol. 70(PB).
    5. Douglas Cumming & Minjie Zhang, 2019. "Angel investors around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(5), pages 692-719, July.
    6. Motavaseli Mahmood & Shojaei Saeed & Bitaab Ali & Hasti Chitsazan & Ghanbar Mohammadi Elyasi, 2018. "Institutional Barriers to Financing Technology-based Small Firms through Venture Capital Mechanism: A Study to Explore the Incentives for Investment in Iran," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 184-195.
    7. Cumming, Douglas & Zhang, Yelin, 2016. "Alternative investments in emerging markets: A review and new trends," Emerging Markets Review, Elsevier, vol. 29(C), pages 1-23.
    8. William Scheela & Edmundo Isidro & Thawatchai Jittrapanun & Nguyen Trang, 2015. "Formal and informal venture capital investing in emerging economies in Southeast Asia," Asia Pacific Journal of Management, Springer, vol. 32(3), pages 597-617, September.

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