Entrepreneurial Finance in Weak Institutional Environments
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Citation of Original PublicationLingelbach, D.(2012-03-22). Entrepreneurial Finance in Weak Institutional Environments. In The Oxford Handbook of Entrepreneurial Finance. : Oxford University Press.
weak institutional environments
entrepreneurial financing systems
entrepreneurial financing outcomes
Entrepreneurs and their financiers in emerging and developing countries face a diversity of challenges and opportunities that often differ from those faced by their counterparts in developed countries. Some of these challenges-if one fictional, but plausible, account from India is to be believed-may be quite extreme. This article considers what we do and do not know about this phenomenon, and how the phenomenon and our knowledge about it are likely to change. The diversity of institutional environments within weak institutional environments (WIEs) has created a wide variety of entrepreneurial financing systems and outcomes. The institutional environment is more important for younger firms seeking external finance than it is for mature firms. A variety of factors may contribute to the size and success of entrepreneurial finance markets in WIEs, including legal origin, the presence (or absence) of government support, tax laws, the development of the banking sector, unexploited opportunities for new investments, the size of the stock market, and the characteristics of institutional investors.