Blockchain and other innovations in entrepreneurial finance: Implications for future policy

• Date: 01 January 2019
• Published date: 01 January 2019
• DOI: http://doi.org/10.1002/jsc.2250

OVERVIEW ARTICLE

Blockchain and other innovations in entrepreneurial finance:

Implications for future policy

*

Robyn Owen

1

| Ciaran Mac an Bhaird

2

| Javed Hussain

3

| Tiago Botelho

4

1

CEEDR, Middlesex University Business School, London, United Kingdom

2

Fiontar, Fiontar (Enterprise), Dublin City University, Dublin, Ireland

3

Birmingham City Business School, Birmingham City Business School, Birmingham City University, Birmingham, United Kingdom

4

Norwich Business School, University of East Anglia, Norwich, United Kingdom

Correspondence

Robyn Owen, Associate Professor of Entrepreneurial Finance, Centre for Enterprise and Economic Development Research (CEEDR), Middlesex University Business

School, The Burroughs, London NW44BT, United Kingdom.

Email: r.owen@mdx.ac.uk

1|INTRODUCTION

More than a decadeafter the Global Financial Crisis (GFC) of 2007–08,

entrepreneurial finance has exhibitedenormous changes, notably in the

rise of alternative nonbank financing (Bruton, Khavul, Siegel, & Wright,

2015; Cumming& Johan, 2017; Kraemer-Eis,Botsari, Gvetadze,Lang, &

Torfs, 2017; Moenninghoff & Wieandt, 2013; Owen, Mason, &

Pierrakis, 2018). This has been most acutely experienced in the provi-

sion and delivery of early stage and innovative business finance—the

focus of this special issue. The ensuing innovations in entrepreneurial

finance have takenplace in developed and developing economies, pre-

senting considerable challengesto policymakers (Mason, 2018).

The problems associated with early stage innovation finance lead-

ing to funding gaps are long recognized (MacMillan, 1931), notably

due to information asymmetries, lack of collateral, lack of market trac-

tion, large amounts of patient capital required, and high proportions

of failure rates (Lee, Sameen, & Cowling, 2015; North, Baldock, &

Ullah, 2013). These have been exacerbated through post GFC credit

rationing (Cowling, Liu, & Ledger, 2012; Lee et al., 2015) and reposi-

tioning of established forms of debt and equity risk finance to later

stage investment (Baldock & Mason, 2015). Given the rationale for

encouraging innovative SME start-up and growth as a driver for eco-

nomic recovery and growth (Lerner, 2010; Nesta, 2009), policymakers

across the globe have sought to encourage new forms of early stage

finance for innovative SMEs (Wilson & Silver, 2013). While there have

been a host of journal special issues examining specific new forms of

entrepreneurial finance (Bonini, Capizzi, & Cumming, 2019);

Cumming & Groh, 2018; Bruton et al., 2015; Harrison & Baldock,

2015) such as crowdfunding, peer to peer (P2P) and more latterly

blockchain tokenization (O'Dair & Beaven, 2017) and the reasons for

the emergence and roles of new players in the entrepreneurial finance

market (Block, Colombo, Cumming, & Vismara, 2017), such as crowd

funding platforms, accelerators, angel networks, seed venture capital

(VCs), asset-based financiers, challenger banks, and new forms of early

stage public investment feeder markets (Baldock, 2015), considerably

less has been written about the public policy challenges this presents.

The focus of this Special Issue is a contemporary examination of

the new forms of entrepreneurial finance evolving for innovative early

stage SMEs which are often pre or early trading and do not have

sufficient track record to attract more traditional bank debt and VC

risk finance. As Lerner (2010) and Mazzucato and Penna (2016)

recognize, the creation of a flourishing and sustainable early stage

innovation finance market in any economy (developed or developing)

requires favorable institutional and regulatory frameworks, suggesting

the need for holistic policy approaches to stimulate both the demand

and supply-sides of the entrepreneurial finance market or ecosystem

(Brown & Mason, 2014; Hwang & Horowitt, 2012).

Strategic Change has been at the forefront of publishing cutting-

edge contemporary research examining these changes, notably featur-

ing new forms of crowdfunding and blockchain finance and emerging

market developments in China and India. It is therefore a natural home

for the dissemination of the pioneering research papers presented in

this issue. These were drawn from an initial call for papers at the

annual Institute for Small Business and Entrepreneurship (ISBE) con-

ference in Belfast, November, 2017 and one day conference held by

the ISBE Entrepreneurial Finance Special Interest Group at

Birmingham City University in March, 2018. This resulted in the eight

peer-reviewed papers presented. The special issue editorial team is

particularly grateful to the Strategic Change Chief Editor Professor

*J.E.L. classification code: G00.

DOI: 10.1002/jsc.2250

Strategic Change. 2019;28:5–8. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 5