Abstract
Considering the globalized nature of international financial markets and the important role of innovative entrepreneurial endeavors for employment and economic development, this paper analyzes the global supply and demand of entrepreneurial finance, in the form of individuals’ savings and borrowings for entrepreneurial ventures in the global economy. To this end, a theoretical treatment of the potential global entrepreneurial finance market (GEFM) dynamics, in response to governments and private sector financial transfers, is first provided. This is followed by the econometric modeling of such dynamics based on intertemporal random utility maximization, using pooled data from the 2014 and 2017 global financial inclusion surveys. The findings reveal, contrary to theoretical predictions, that private sector financial injections (i.e., electronic wage payments), exert an adverse effect on the GEFM; meanwhile, in accordance with theoretical predictions, public sector financial injections (i.e., electronic welfare payments), do positively influence the growth of the GEFM. In addition, compared to their male counterparts, females are found to be 7% more likely to own a formal account, and are 23.4% more likely to save for farming or business entrepreneurship, while also being 18.8% more likely to borrow for entrepreneurial ventures, therefore suggesting a relatively greater growth potential from female entrepreneurship in the global economy.
Highlights
Technological development and the resulting rise of social media has been reshaping the entrepreneurial finance market landscape with new players, financial intermediaries, and a variety of emerging market segments [1,2]
The following structure is adopted for the rest of this paper: Section 2 develops a succinct review of the stream of entrepreneurial finance literature built around the various fundraising instruments; Section 3 presents the materials and methods, by first providing a theoretical analysis of the dynamics within the global entrepreneurial finance market (GEFM), followed by the presentation of a Random utility based econometric formulation of economic agents’ behavioral optimization within the GEFM, and by a description of the data and variables used in the analysis; Section 4 presents the results, which are discussed in Section 5, along with the limitations and directions for further research
These findings suggest that increased individual income levels have no significant impact on the global entrepreneurial finance demand but significantly increases the global entrepreneurial finance supply, along with the likelihood of formal financial inclusion in the global economy
Summary
Technological development and the resulting rise of social media has been reshaping the entrepreneurial finance market landscape with new players, financial intermediaries, and a variety of emerging market segments [1,2]. The GEFM is assumed here to portray the economic behavior (dynamic interactions) of all potential savers and borrowers for entrepreneurial ventures in the global economy In this sense, “the global demand for entrepreneurial funds (GEFD)” is driven by all those borrowing for entrepreneurial ventures, while “the global supply of entrepreneurial funds (GEFS)” is driven by all those saving for entrepreneurial ventures. If financial intermediaries have relatively more power, their arbitrage role will be exogenous to the GEFM This means that those saving and those borrowing for entrepreneurial ventures will be taking their funds’ rate as exogenously set and adjust their optimization behaviors . If the GEFM is imperfectly competitive, financial intermediaries will have relatively less market power, in which case their arbitrage role will be endogenous This implies that globally, those saving and those borrowing for entrepreneurial ventures will be influencing the entrepreneurial funds rate (cost) endogenously through their optimization behaviors. The following structure is adopted for the rest of this paper: Section 2 develops a succinct review of the stream of entrepreneurial finance literature built around the various fundraising instruments; Section 3 presents the materials and methods, by first providing a theoretical analysis of the dynamics within the global entrepreneurial finance market (GEFM), followed by the presentation of a Random utility based econometric formulation of economic agents’ behavioral optimization within the GEFM, and by a description of the data and variables used in the analysis; Section 4 presents the results, which are discussed in Section 5, along with the limitations and directions for further research
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