Frontiers in European Entrepreneurship Research
Edited by David Smallbone, Hans Landström and Dylan Jones-Evans
Chapter 6: The Financial Requirements of Early-Stage Entrepreneurs
Colm O’Gorman INTRODUCTION How much finance do early-stage entrepreneurs expect to use when starting a firm? Does the level of finance required to start a firm differ across countries? Do country differences in aspects of the institutional environment that shape the choices of individuals – who becomes an entrepreneur; the nature of entrepreneurship; in what sectors does entrepreneurship occur; and the cost of market entry – lead to variation in the financial requirements of nascent entrepreneurs? In seeking to influence levels of entrepreneurial activity, the policy maker faces two significant problems. First, to effectively influence the scale and scope of entrepreneurial activity policy makers need to understand ‘what determines the supply of productive entrepreneurship’ (Baumol, 1993, p. 16) or, phrased differently, what factors influence a country’s ‘entrepreneurial capital’, defined by Audretsch and Keilbach, as the ‘regional milieu of agents that is conducive to the creation of new firms’ (2004, p. 420). Clearly not all national economic systems are equally good at supporting entrepreneurship or new market entry, as evidenced by variations in the levels of entrepreneurial activity across national context (Acs et al., 2004; Audretsch et al., 2002; Scarpetta, 2003), within national contexts (Johnson, 2004; Reynolds et al., 1994), and over time (Carree et al., 2002; Chandler, 1990). Policy choices made at national and regional levels give rise to the evolution of differing institutional arrangements between countries and within countries. Providing direct and indisputable evidence of the relationship between any given institutional arrangements and entrepreneurial activity is a ‘difficult and perhaps an...
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