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Ang, James S.
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[Journal:] The Journal of Entrepreneurial Finance (JEF) [ISSN:] 1551-9570 [Volume:] 20 [Year:] 2018 [Issue:] 1 [Pages:] 1-20
Corporate finance for the entrepreneurial firm is fundamentally different from that of the traditional firm. The standard problems and solutions to both investment and financing are reformulated in this paper. The formulation is intended to capture two distinguishing features of entrepreneurial finance: 1) Although new ventures yield negative returns on average, they are in aggregate welfare increasing for the economy, after considering their positive externalities. 2) Due to new ventures' lack of consistent cash flows, which precludes the use of debt, the debt versus equity financing choice is replaced by the choice between the entrepreneurs' desire for wealth versus control; taking 'a larger slice of a smaller pie,' or 'a smaller slice of a larger pie.'
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