The Globalization of Angel Investments: Evidence Across Countries

Josh   Lerner; Antoinette  Schoar; Stanislav  Sokolinski; Karen  Wilson

Article | Journal of Financial Economics | January 2018

The Globalization of Angel Investments: Evidence Across Countries

by Josh Lerner, Antoinette Schoar, Stanislav Sokolinski and Karen Wilson

Abstract

This paper examines investments made by 13 angel groups across 21 countries. We compare applicants just above and below the funding cutoff and find that these angel investors have a positive impact on the growth, performance, and survival of firms as well as their follow-on fundraising. The positive impact of angel financing is independent of the level of venture activity and entrepreneur friendliness in the country. However, we find that the development stage and maturity of startups that apply for angel funding (and those that are ultimately funded) is inversely correlated with the entrepreneurship friendliness of the country, which may reflect self-censoring by very early stage firms that do not expect to receive funding in these environments.

Keywords: Entrepreneurship; Globalization; Investment; Business Startups;

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Lerner, Josh, Antoinette Schoar, Stanislav Sokolinski, and Karen Wilson. "The Globalization of Angel Investments: Evidence Across Countries." Journal of Financial Economics 127, no. 1 (January 2018): 1–20.

Governments are important financiers of private sector innovation. While these public funds can ease capital constraints and information asymmetries, they can also introduce political distortions. We empirically explore these issues for China, where a quarter of firms’ R&D expenditures come from government subsidies. Using a difference-in-differences approach, we find that the anti-corruption campaign that began in 2012 and the departures of local government officials responsible for innovation programs strengthened the relationship between firms’ historical innovative efficiency and subsequent subsidy awards and depressed the influence of their corruption-related expenditures. We also examine the impact of these changes: subsidies became significantly positively associated with future innovation after the anti-corruption campaign and the departure of government innovation officials.

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The Globalization of Angel Investments: Evidence Across Countries

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