The development of research in entrepreneurial finance is apparent in the proliferation of work focusing on the financial aspects of entrepreneurship; a field of management science which is beginning to organise itself along the same lines as other existing fields such as strategy, marketing or finance. This surge in interest is reflected not only by the increase in the number of research papers on entrepreneurial finance being published in the main financial journals but also by the appearance of scientific magazines, books and conferences dedicated to this field such as Venture Capital journal (1999), The Journal of Entrepreneurial Finance and Business Ventures (2000), or the annual conference of The Academy of Entrepreneurial Finances (1989).
According to Denis (2004), entrepreneurship had long been regarded by finance researchers as a separate field from corporate finance due to the presupposition that problems encountered in entrepreneurial finance are sufficiently different from those faced by listed companies as to limit the applicability of traditional financial theory. However, more recently, financiers have recognized that entrepreneurial situations are characterized by the two same fundamental problems which are at the root of financial theory: agency dilemmas and asymmetric information. Entrepreneurial finance differs from traditional corporate finance only in that the importance of these problems is greater, necessitating recourse to contractual solutions distinct from those put in place in larger, more established companies. Initially confined to the study of four main fields (alternative sources of capital, financial contracting issues, public policy issues, risk and return in private equity investments), entrepreneurial finance now explores a broader range of fields.
In order to better understand the importance of financial fact in entrepreneurship, it is advisable to first define entrepreneurship itself. Several authors such as Schildt et al. (2006) have defined entrepreneurship by its paradigms such as: business opportunity, the creation of an organization, value creation, innovation, and entrepreneurial risk. But whatever the paradigm selected, entrepreneurship and finance are inevitably dependant because entrepreneurial projects require resources. The acquisition of these resources depends on the capacity to finance them. This involves looking into the financial dimension of entrepreneurial projects.
Faced with the obvious links between entrepreneurship and finance, several questions arise. What is entrepreneurial finance exactly? What are the issues surrounding it? What research has been or is being carried out in this area?
To answer these questions, we will approach them from two different angles. Firstly we will try to specify the scope of entrepreneurial finance by identifying the issues surrounding them which have already featured in published research work. Then, we will attempt to structure the studies done in this field and suggest some lines of research.
II. HOW IS THE FIELD OF ENTREPRENEURIAL FINANCE DEFINED?
How can one define the field of entrepreneurial finance? Several studies have attempted to present the different themes and topics, or to summarize results obtained in the field of entrepreneurial finance (or within the narrower area of venture capital). On initial analysis, examining these works closely can help identify the chosen lines of research and thus gain a greater understanding of the field of entrepreneurial finance. Three studies have been retained. They are studies by Brophy & Shulman (1992), Saint-Pierre and Mathieu (2003) and Denis (2004) which provide details of more recent developments.
Brophy & Shulman (1992) consider that venture capital is a field which provides the hub between finance and entrepreneurship. They identify several specific areas of research:
* the characteristics of investors in new ventures: the company creator and his team, informal investors (business angels), and formal investors (venture capital). …