The Spatial Dispersion of Informal Investment at a Regional Level: Evidence from the UK

Abstract

Although there have been various studies on the geographical specialization of venture capital in the UK, there remains a gap in the research on regional differences in the behaviour of those informal investors who make a significant contribution to the funding of entrepreneurial ventures. Utilizing a unique data set from the Global Entrepreneurship Monitor project, this study will estimate the level of informal investment activity across the different regions of the UK. The relationship between informal investment and early stage formal venture capital availability is also examined to determine which areas display the greatest funding gaps in the provision of equity finance. It shows that while formal and informal investments are heavily concentrated in highly prosperous areas such as London and the South East of England, informal investments make a larger relative contribution to early stage and expansion equity capital within poorer regions.

Acknowledgements

The authors would like to acknowledge the support of Rebecca Harding, Jonathan Levie, David Brooksbank and Mark Hart in the development of the UK GEM data set. However, the analysis and interpretation of the data contained within this paper are the sole responsibility of the authors.