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Journal cover: Journal of Chinese Entrepreneurship

Journal of Chinese Entrepreneurship

ISSN: 1756-1396
Currently published as: Journal of Entrepreneurship in Emerging Economies

Online from: 2009

Subject Area: Enterprise and Innovation

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Combining formal and informal financial sources: Russian early entrepreneurs' and established firms' structure of external financing

Document Information:
Title:Combining formal and informal financial sources: Russian early entrepreneurs' and established firms' structure of external financing
Author(s):Artem Gudov, (International College of Economics and Finance, Higher School of Economics, National Research University, Moscow, Russia)
Citation:Artem Gudov, (2013) "Combining formal and informal financial sources: Russian early entrepreneurs' and established firms' structure of external financing", Journal of Chinese Entrepreneurship, Vol. 5 Iss: 1, pp.39 - 60
Keywords:Entrepreneurial life cycle, Entrepreneurialism, Entrepreneurship, Equity gap, Financing, Informal and formal financing, New equity gap, Russia, Small enterprises, Venture capital
Article type:Research paper
DOI:10.1108/17561391311297879 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:The author thanks his scientific advisers and supervisors at his home university, Professor Ivan Rodionov, Ass. Professor Olga Obraztsova and Professor Alexander Chepurenko, for many helpful discussions and suggestions. The author is also indebted to the Laboratory on Entrepreneurship Research at the National Research University, Higher School of Economics and the organizing committee of the Russian Venture Fairs for providing the data. The author takes responsibility for all remaining errors.

Purpose – The aim of the paper is to analyze quantitatively and qualitatively requirements of Russian micro- and small-firms in financial sources, along with opportunities and restrictions in the mobilization of investment at the different stages of a firm's life cycle.

Design/methodology/approach – In this paper the determinants of the propensity to invest and the supply of funding are investigated by using the Global Entrepreneurship Monitor (GEM) data set for Russia in the time period from 2006 to 2011.

Findings – The paper provides the analysis of Russian early entrepreneurs' and established business owners' decisions about the preferred structure of financial sources, comprising both statistical and logistic regression approaches for this investigation. The findings indicate that in Russia the structure of financial sources of start-up entrepreneurs is predominated by “love capital” (mainly private and family savings), meanwhile, the percentage of business angels' financing is low in comparison with innovation-driven countries. Moreover, there are merely extra-economic factors, which influence informal investors' decision making on funding: personal relations with a borrower, an optimistic view on macroeconomic perspective and high status of an entrepreneur.

Practical implications – The findings in this paper suggest that this research can help the officials to formulate a program of SMEs' support at different stages of the financial chain in Russia.

Originality/value – In this paper the early and middle stages of a firm's life cycle are examined and some practical advice on a company's development and expansion are given.

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