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Business Angels and Firm Performance: First Evidence from Population Data

Fredrik W. Andersson and Magnus Lodefalk

No 342, Ratio Working Papers from The Ratio Institute

Abstract: Business angels dominate early stage investment in firms but research on the effects of their investment is scarce and limited by sample selection. We therefore propose an algorithm for identifying business angel investment in total population data. We apply the algorithm to study the effects of business angels on firm performance, using detailed and longitudinal total population data for individuals and firms in Sweden. Employing these data and a quasi-experimental estimator, we find that business angels engage in firms that already perform above par but that there also is a positive effect on subsequent growth, comparing with control firms. Firms with business angel investment perform better in terms of sales and employment growth and likelihood of becoming a high-growth firm. Contrary to previous research, we cannot find any impact on firm survival, however. Overall, our results underline the need to address sample selection issues both in identifying business angels and in evaluating their effects on firm performance.

Keywords: Business angels; Firm performance; Sample selection; Population Data (search for similar items in EconPapers)
JEL-codes: C23 G24 G32 L25 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-12-21
New Economics Papers: this item is included in nep-bec, nep-ent and nep-sbm
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