Small Business Managers as Latent Informal Investors in Japan: Evidence from a country with a bank-based financial system


This paper demonstrates the activities of small business managers acting as financial and non-financial supporters of business start-ups in Japan, a country with a bank-based financial system, by using two data sets both surveyed in 1999 by the National Life Finance Corporation. Also, based on these analyses we seek to examine the possibilities of small business managers as latent informal investors for start-ups. The empirical results showed that managers who are younger, of relatively larger small businesses, or who had received support when their own businesses were starting tended to provide start-up support. It was shown that there was a clear tendency to provide financial support to “different” business types from the managers’ own businesses. Also, no evidence was shown that start-up support by small business managers tended to enhance the post-entry performance and possible success of new businesses. However, if we keep in mind that informal investors are extremely diverse, we can, through the promotion of research on the role of small business managers as latent informal investors, offer meaningful suggestions to countries whose formal and informal venture capital markets are still in the early stages of development.

Key Words
informal investor; small business manager; start-ups; bank-based financial system

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