What Is the Impact of Informal Entrepreneurship on Venture Capital Flows?
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What Is the Impact of Informal Entrepreneurship on Venture Capital Flows? Eunice Santos 1 & Cristina I. Fernandes 1,2 Carla Azevedo Lobo 3
& João
J. Ferreira 1 &
Received: 22 June 2019 / Accepted: 27 October 2020/ # The Author(s) 2020
Abstract There has been a diverse range of research on the factors enabling informal entrepreneurship as well as the means to avoid or to eradicate its incidence. Several researchers argued that venture capital and financial flows, in general, contribute to economic growth and development. There have also been observations of how the investor level of trust in institutions facilitates investment decisions. This trust comes into play at the level of informal entrepreneurship and the ability of governments to control this type of entrepreneurship. Given that a great deal of research on this subject focuses its analysis on developing countries, we have chosen to investigate the reality of European countries precisely because of the scarcity of studies on the effect of informal entrepreneurship in this context. Our research aims to assess how informal entrepreneurship effects on venture capital flows. We use aggregated data at country level collected from a variety of sources, including the World Bank, Organization for Cooperation and Development and World Economic Forum, between 2006 and 2015 and 23 countries in Europe, corresponding to 230 observations (panel no. balanced). Through econometric estimation, which took place according to methodologies based on multiple regression models for panel data, the results demonstrate how informal entrepreneurship has a negative moderating effect between GDP and venture cUKapital flows. We intend to contribute to a better understanding of the effect of informal entrepreneurship on the flows of venture capital. Keywords Informal entrepreneurship . Venture capital . Economic development
Introduction This current research seeks to evaluate the effect of informal entrepreneurship on venture capital flows. In recent years, and in opposition to the conventional literature in which * Cristina I. Fernandes [email protected] Extended author information available on the last page of the article
Journal of the Knowledge Economy
entrepreneurs emerge as some kind of business heroes (Cannon 1991) or supermen and often portrayed as objects of desire (Berglund and Johansson 2007), another approach has emerged that considers other practical entrepreneurship experiences. One aspect incorporates the growing literature on the lunar side of entrepreneurship. This spans at least two sets of literature. One set focuses on the fact that individuals who engage in illegitimate activities also display both entrepreneurship (Armstrong 2005; Bruns et al. 2011; Karjanen 2011; de Jong et al. 2012; Smith and McElwee 2013) and the typical attributes of “entrepreneurs” (Gottschalk and Smith 2011; Bucur et al. 2012). The other set, which is the object of our study here, approaches informal entrepreneurship and recognizes how entrepreneurs sometimes operate ent
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