Financing and Facilitating Entrepreneurship

Dear Colleagues,

It is generally agreed that entrepreneurship and new venture creation are good for economies, if the ventures can experience reasonable growth and encourage productivity gains (Ahlstrom, 2010; McCloskey, 2013; Mokyr, 2016). Research has slowly started to identify ways in which growth entrepreneurship can be seeded and encouraged (Lerner, 2009). Since new firms, especially fast growing ones typically need cash; financing from various sources can facilitate entrepreneurial ventures and their growth (Chen, Chang, & Bruton, 2017). For example, start-ups can now sell shares to the public in many countries via crowdfunding portals. Microfinancing of startups and small businesses is another method that has grown considerably and gained much policy (and research) attention in recent years (Newman, Schwarz, & Ahlstrom, 2017). Venture capital, private equity, sovereign wealth financing, and other governments programs are other approaches to encouraging entrepreneurship financially (Lerner, 2009). Though an emerging field of study, a number of papers and special issues have already been dedicated to crowdfunding, microfinance, venture capital, and government funding schemes vis a vie the encouragement of entrepreneurship. These come from different streams of research, including entrepreneurship, venture capital, finance, marketing, and information technology, all suggesting the multidisciplinary nature of this field of study.

The intent of the newer methods of entrepreneurial financing, whether from small investors, banks, venture capitalists or government is to encourage and facilitate entrepreneurship. Yet this is more complicated than it appears. Capital is a key factor in entrepreneurship and small business but it is not the only factor (Lerner, 2009). The type of financing matters, not only for the financing itself, but for the legitimacy and social validation the financing can confer (Christensen & Raynor, 2013). So financing encouraging growth entrepreneurship and providing social validation are additional crucial variables in this important process.

This special issue of the Journal of Risk and Financial Management seeks papers that examine entrepreneurial financing and its provision to firms related facilitating of new ventures. As with the financing any new ventures or projects, some information asymmetries will exist between insiders and outsiders, that is, the firms and the funders, which will generate agency concerns. In this regard, corporate governance research is needed to address questions of agency. Other theoretical lenses from entrepreneurship and management such as effectuation and institutional theory are also helpful in addressing questions of entrepreneurial funding and the encouragement of growth. In that regard, among the general topics to be considered are:

1. The effect of different funding mechanisms on firm foundings and growth.
2. As Clayton Christensen has written (Christensen & Raynor, 2013), is there ‘good money’ and ‘bad money’ in funding new ventures? What is that distinction?
3. Psychological factors such as emotion, risk-taking, and mindset in entrepreneurial financing are important; what is their impact on subsequent development and performance? This can be addressed through a variety of theoretical, disciplinary lenses.
4. Agency issues can arise from the separation between ownership and control (principal-agent) and between controlling and minority shareholders (principal-principal) in entrepreneurial financing markets (Liu, Ahlstrom, & Yeh, 2006; Young, Peng, Ahlstrom, Bruton, & Yi, 2008). What are the concerns here and how can these be managed?
5. Regarding entrepreneurial finance, the main goal of crowdfunding is not the funding campaign, but the building of an enduring business. What is the effect of crowdfunding in terms of building enduring businesses?
6. What is government’s role in entrepreneurial financing? Government seeding of industrial sectors has a very mixed history. What have we learned about this over the past thirty years or so since the topic of industrial policy became very visible (Lerner, 2009).
7. Entrepreneurial financing practices differ in different countries. Will recent trends in globalization create more idiosyncratic markets? How are formal (legal, regulatory) and informal (culture, social validation, norms) important in financing and encouraging entrepreneurship?

The special issue is intended to cover a range of topical areas regarding the financing and facilitation of growth entrepreneurship. That means that other related topics can be covered with respect to the roles of venture capitalists, angel investors, private equity firms, government, universities and other entities that would finance or otherwise encourage innovation. The special issue seeks to cast a wide net beyond finance alone toward other factors that can encourage growth entrepreneurship, without losing sight of the importance of financing and the advice, support, and legitimacy of finance providers (McCloskey, 2013). A wide range of methods, research designs, and disciplines are encouraged, including qualitative research designs and conceptual papers (Creswell, 2012; Mokyr, 2016; Sapolsky, 2017; Shane, 2010).

The deadline for submission is March 10, 2019

All manuscripts submitted to the special issue should be submitted through the website: https://www.mdpi.com/journal/jrfm/special_issues/entrepreneurship

Contributors should follow the JRFM Author Guidelines (which can be found at https://www.mdpi.com/journal/jrfm/instructions)

Final decisions on papers for the JRFM Special Issue will be made later in the year.

Contacts

David Ahlstrom, CUHK Business School, The Chinese University of Hong Kong

[email protected]

References

Ahlstrom, D. (2010). Innovation and growth: How business contributes to society. Academy of Management Perspectives, 24(3), 11-24.

Chen, J., Chang, A. Y., & Bruton, G. D. (2017). Microfinance: Where are we today and where should the research go in the future? International Small Business Journal, 35(7), 793 – 802.

Christensen, C. M., & Raynor, M. E. (2013). The Innovator's Solution: Creating and Sustaining Successful Growth. Boston: Harvard Business Review Press.

Creswell, J. 2012. Qualitative inquiry and research design: Choosing among five approaches (3^rd ed.). Thousand Oaks, CA: Sage Publications.

Lerner, J. (2009). Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It. Princeton, NJ: Princeton University Press.

Liu, Y., Ahlstrom, D., & Yeh, K. S. (2006). The separation of ownership and management in Taiwan's public companies: An empirical study. International Business Review, 15(4), 415-435.

McCloskey, D. N. 2013. Tunzelmann, Schumpeter, and the hockey stick. Research Policy, 42(10), 1706-1715.

Mokyr, J. (2016). A culture of growth: The origins of the modern economy. Princeton, NJ: Princeton University Press.

Newman, A., Schwarz, S., & Ahlstrom, D. (2017). Microfinance and entrepreneurship: An introduction. International Small Business Journal, 35(7), 787-792.

Sapolsky, R. M. (2017). Behave: The biology of humans at our best and worst. New York: Penguin Press.

Shane, S. A. (2010). The illusions of entrepreneurship: The costly myths that entrepreneurs, investors, and policy makers live by. New Haven, CT: Yale University Press.

Young, M. N., Peng, M. W., Ahlstrom, D., Bruton, G. D., & Jiang, Y. (2008). Corporate governance in emerging economies: A review of the principal–principal perspective. Journal of Management Studies, 45(1), 196-220.

Prof. Dr. David Ahlstrom
Guest Editor

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