The influence of functional and relational proximity on business angel investments
by Johannes Herrmann; Sofia Avdeitchikova; Alexander Hjertström
International Journal of Entrepreneurship and Small Business (IJESB), Vol. 29, No. 3, 2016

Abstract: Business angels are a vital source of capital for innovative start-up firms. However, many potentially attractive investment opportunities are rejected during the angel's decision-making 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 conceptual foundation to understand how the relationship between angel and entrepreneur hinders or benefits the investment decision. Specifically, researchers distinguish between the functional (geographic) and relational dimensions of proximity. This paper uses structural equation modelling to examine the influence of proximity on angel investments based on data from 226 investment situations gathered in fall 2014 from 56 business angels and 87 entrepreneurs in Sweden. We find that the relationship between geographic proximity and the likelihood of a positive investment decision is indeed positive and significant, supporting prior research; however, it is fully mediated by relational proximity.

Online publication date: Wed, 28-Sep-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Entrepreneurship and Small Business (IJESB):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com