A Globalizing Industry
Handbooks in Venture Capital series
Edited by Hans Landström and Colin Mason
Chapter 8: The geographic organization of ‘venture capital’ and ‘business angels’
The geography of financial markets has been a subject of interest for geographers and regional economists for at least three decades. One of the main themes of this research has been that financial markets are infl uenced by economic, social, cultural and other factors which often results in uneven distribution of capital, both within and between countries (Martin, 1999). This has been observed in several financial sectors, such as banking, venture capital markets, stock markets and pension funds. The uneven distribution of finance is significant, since it is closely connected to opportunities for growth and economic development in regions and countries. In research on venture finance, regional variations in access to capital are often referred to as the ‘regional capital gap’. This implies that entrepreneurs’ ability to obtain external financing from market actors is dependent on the location of the venture, which means that entrepreneurs outside centres of financial and economic activity are particularly disadvantaged in terms of getting financed (Thompson, 1989; Mason and Harrison, 1995). The geography and regional determinants of availability of venture finance from institutional investors and business angels has therefore been a recurring topic on the research and policy agenda during the last decades. Equally important are the cross-national variations in access to capital, since a country’s ability to attract venture financing is believed to critically affect its capacity to develop a dynamic sector of innovative entrepreneurial SMEs.
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