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The Influence of Functional and Relational Proximities on Business Angel Investments

PublicationArticle (with peer review)
Alexander Hjertström, Företagandets villkor, Johannes Herrmann, Sofia Avdeitchikova

Abstract

Business angels are a vital source of capital for innovative startup firms. However, even among potentially attractive investment opportunities, most are rejected during the angels investment decision 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 suitable conceptual foundation to understand how the relationship between angel and entrepreneur might hinder or benefit the investment decision. Particularly, researchers distinguish between functional (geographical) and relational dimensions of proximity. This paper examines the influence of proximity on business angel investments based on data from 226 investment situations gathered in fall 2014 from 56 business angels and 87 entrepreneurs in Sweden and analyzed using Structural Equation Modelling technique. We find that the relationship between geographical proximity and the likelihood of positive investment decision is indeed positive and significant, as indicated in prior research, but that it is fully mediated by relational proximity.

Keywords: Business angels; investment decision; functional proximity; relational proximity; structural equation modeling; mediation.

Related content: Working paper 253

Herrmann, J., Avdeitchikova, S., & Hjertstrom, A. (2016). The Influence of Functional and Relational Proximities on Business Angel Investments. International Journal of Entrepreneurship and Small Business, 29(3), 468-490. DOI: 10.1504/IJESB.2016.079424

Based on content

The Influence of Functional and Relational Proximities on Business Angel Investments
Artikel (med peer review)Publication
Herrmann, J., Avdeitchikova, S., & Hjertstrom, A.
Publication year

2016

Abstract

Business angels are a vital source of capital for innovative startup firms. However, even among potentially attractive investment opportunities, most are rejected during the angels investment decision 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 suitable conceptual foundation to understand how the relationship between angel and entrepreneur might hinder or benefit the investment decision. Particularly, researchers distinguish between functional (geographical) and relational dimensions of proximity. This paper examines the influence of proximity on business angel investments based on data from 226 investment situations gathered in fall 2014 from 56 business angels and 87 entrepreneurs in Sweden and analyzed using Structural Equation Modelling technique. We find that the relationship between geographical proximity and the likelihood of positive investment decision is indeed positive and significant, as indicated in prior research, but that it is fully mediated by relational proximity.

Keywords: Business angels; investment decision; functional proximity; relational proximity; structural equation modeling; mediation.

Related content: Working paper 253

Recruitment of scarce competences to rural regions: Policy perspectives
Article (with peer review)Publication
Nyström, K.
Publication year

2021

Published in

Review of regional research.

Abstract

This paper studies the perceived difficulty of recruiting scarce competencies to rural regions. Furthermore, the role of policy in facilitating and enhancing recruitment to and better skills matching in rural regions is discussed. Based on a survey targeted to the business sections of Swedish municipalities, the results show that recruitment is perceived to be difficult in both rural and nonrural regions and that the difficulty of recruiting for the right skills results in a lack of skills matching and constitutes an obstacle to growth. Rural regions located close to urban areas can to some extent mitigate these recruitment problems, and their locations pose less of a barrier in recruitment processes compared to those of remotely located rural regions.

Which policies can help remedy recruitment problems faced in rural regions? In both rural and nonrural regions, incentives for writing off student debt and relocation support for accompanying persons and tandem recruitment are perceived to be the most promising policies. Rural regions are more receptive to the implementation of such policies. Finally, the need for flexibility and policies that can be adapted to the regional demand for labour are stressed.

Nyström, K. Recruitment of scarce competences to rural regions: Policy perspectives. Rev Reg Res (2021). https://doi.org/10.1007/s10037-021-00155-

The Effect of Marshallian and Jacobian Knowledge Spillovers on Jobs in the Solar, Wind and Energy Efficiency Sector
Article (with peer review)Publication
Aldieri, L., Grafström, J., & Vinci, C. P.
Publication year

2021

Published in

Energies, 14(14), 4269.

Abstract

The purpose of this paper is to establish if Marshallian and Jacobian knowledge spillovers affect job creation in the green energy sector. Whether these two effects exist is important for the number of jobs created in related fields and jobs pushed away in other sectors. In the analysis, the production efficiency, in terms of jobs and job spillovers, from inventions in solar, wind and energy efficiency, is explored through data envelopment analysis (DEA), based on the Malmquist productivity index, and tobit regression. A panel dataset of American and European firms over the period of 2002–2017 is used. The contribution to the literature is to show the role of the spillovers from the same technology sector (Marshallian externalities), and of the spillovers from more diversified activity (Jacobian externalities). Since previous empirical evidence concerning the innovation effects on the production efficiency is yet weak, the paper attempts to bridge this gap. The empirical findings suggest negative Marshallian externalities, while Jacobian externalities have no statistical impact on the job creation process. The findings are of strategic importance for governments who are developing industrial strategies for renewable energy.

Aldieri, L., Grafström, J., & Vinci, C. P. (2021). The Effect of Marshallian and Jacobian Knowledge Spillovers on Jobs in the Solar, Wind and Energy Efficiency Sector. Energies, 14(14), 4269.

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