The Problems with and Promise of Entrepreneurial Finance

• DOI: http://doi.org/10.1002/sej.1265
• Author: Sofia Johan,Douglas Cumming
• Date: 01 September 2017
• Published date: 01 September 2017

The Problems with and Promise of Entrepreneurial

Finance

Douglas Cumming and Sofia Johan*

York University - Schulich School of Business, Toronto, Ontario, Canada

Research summary: This article provides a review of the entrepreneurial finance liter-

ature in the surprisingly not very well integrated entrepreneurship and finance jour-

nals. Entrepreneurial finance encompasses venture capital, private equity, private debt,

trade credit, IPOs, angel finance, and crowdfunding, among other forms of finance.

We analyze trends in citation activity to these topic areas across 16 journals that pub-

lish at least somewhat regularly on these topics, and we show there has been a rise in

citations on venture capital, private equity, and IPOs post-2006. We highlight an

unfortunate degree of segmentation in the literature, as well as topics that have been

the subject of scholarly focus, and identify promising topics for future research.

Managerial summary: Who does research in entrepreneurial finance—entrepreneurship

or finance scholars? And which types of journals are more likely to publish research in

entrepreneurial finance? In this article, we provide an overview of the literature on topics

that include venturecapital, private equity, private debt,trade credit, IPOs, angel finance,

and crowdfunding. Our review of the literature shows some elements of segmentation by

the specific topic, which we explain is partlydue to the fact that datasets on entrepreneur-

ial finance themselves are often segmented and do not include information on more than

one form of entrepreneurial finance at a time. Further, we show citation patterns are seg-

mented by the type of journal, with finance journals being much less likely to refer to

entrepreneurshipjournals. Copyright © 2017 Strategic Management Society.

“Lee Smolin begins The Trouble with Physics

(Smolin, 2007) by noting that his

career spanned the only quarter-century in

the history of physics when the field made

no progress on its core problems. The trouble

with macroeconomics is worse. I have

observed more than three decades of intellec-

tual regress”.

-Romer (forthcoming)

Entrepreneurial finance encompasses the inter-

section of the two separate fields of “entrepreneurship”

and “finance.”The field began with publications

first appearing in entrepreneurship journals, such as

Research Policy (founded in 1972), Entrepreneur-

ship Theory and Practice (founded in 1976), Stra-

tegic Management Journal (founded in 1982), and

Journal of Business Venturing (founded in 1986).

More recently, Strategic Entrepreneurship Journal

was added in 2007. Apart from studies of initial

public offerings (IPOs), topics in entrepreneurial

finance began to appear in finance journals starting

only in 1990, with studies on the impact of venture

capital on initial public offering (IPO) performance

(Barry, Muscarella, Peavy, & Vetsuypens, 1990;

Megginson & Weiss, 1991), despite the fact that

the first finance journal—Journal of Finance—was

founded in 1946. More recently, Journal of Bank-

ing and Finance was founded in 1977 and Journal

of Corporate Finance was founded in 1994; these

are two of the mainstream finance journals, with a

Keywords: entrepreneurship; economics; finance; IPO; ven-

ture capital

*Correspondence to: Sofia Johan, York University - Schulich

School of Business, 4700 Keele Street, Toronto, Ontario M3J

1P3 Canada. E-mail: sjohan@schulich.yorku.ca

Copyright © 2017 Strategic Management Society

Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 11: 357–370 (2017)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1265