2003.23

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

Kenji Kutsuna
Nobuyuki Harada

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

Kenji Kutsuna *Graduate School of Business Administration
Kobe University
Rokkodai 2-1, Nada, Kobe, 657-8501, Japan
Tel: (+81)78-803-6920
Fax: (+81)78-803-6920
kutsuna@rose.rokkodai.kobe-u.ac.jp

Nobuyuki Harada
Japan Center for Economic Research
2-6-1, Nihonbashi, Kayabacho, Chuo-ku, Tokyo, 103-0025, Japan
Tel: (+81)3-3639-2837
Fax: (+81)3-3639-2838
harada@jcer.or.jp* Correspondence Author

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

Abstract
This paper demonstrates the activities of small business managers acting as financial andnon-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, ofrelatively larger small businesses, or who had received support when their own businesses werestarting 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, noevidence was shown that start-up support by small business managers tended to enhance thepost-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 ofsmall 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.

Keywords: informal investor; small business manager; start-ups; bank-based financial system

1. Introduction
In many countries, policy-makers and researchers have a high level of interest in the relationshipbetween entrepreneurial activities and the level of support for entrepreneurial activities from theviewpoint of strengthening international competitiveness (OECD 2000, Reynolds et al. 2001). One

2

important factor is the problem of raising risk capital for new businesses.

Specifically, it isindicated that the difference in the vigorousness of an informal venture capital investment is vital.
Since the pioneering research (Wetzel 1981, 1983, Wetzel and Wilson 1985, Wetzel 1987) conductedin the 1980’s by Professor William Wetzel of the University of New Hampshire on the importance ofthe role informal venture capital plays in investment aimed at businesses in the seed and start-up
stage, a lot of interest has been focused on this area (Sohl 2003).1

For example, Wetzel and Freear(1996) estimated that the scale of informal venture capital investment in the US was five times thetotal value of formal venture capital investment with 20 times as many cases. Also, according to
Gaston (1989b) it was estimated that the total annual genuine informal venture capital in the form ofequity capital was $32.7 billion.

Likewise, if we take the $22.9 billion provided by informal

investors in the form of loans and loan guarantees, and add to this the $19.3 billion that is estimatedas additional investment if there is an investment opportunity, it shows that the scale of the informal
venture capital market reaches $74.9 billion a year.

This situation is not limited to the US.

Although not of the same scale as the US, other European countries have informal venture capital
markets that exceed the scale of the formal venture capital markets (e.g. refer to Harrison and Mason
1997, Mason and Harrison 2000a, Mason and Harrison 2000b for details for the UK).
In addition, informal investors can provide assistance to entrepreneurs in the form of bothfinancial and non-financial assistance such as management advice based on their business experience.
These types of assistance play a very important role in the seed and start-up stage. For businesses
whose future prospects can not be sufficiently foreseen even by the entrepreneurs themselves, raising
capital in the seed and start-up stage is extremely risky, and the scale of the venture is normally
relatively small.

So it is difficult for large-scale formal venture capital firms funded frominstitutional investors to deal with these small sum investments (Bygrave and Timmons 1992).
1

Please also refer to Mason and Harrison (2000) for an excellent survey conducted recently.

3Forexample, as Freear and Wetzel (1990) pointed out, informal venture capital investment plays animportant role in complementing formal venture capital for investment on a small scale of less than$250,000, or for investment during the seed and start-up stage.2
Also, for countries other than the US and the UK, in the last decade, investigative research
aimed at informal investors has advanced rapidly, and the role that informal venture capital plays inproviding capital for businesses in the seed and start-up stage has reached a point where it is almost
commonly recognized (Hindle and Wenban 1999, Hindle and Lee 2002, Reitan and Sörheim 2000,
Landström 1993).

However, a large part of this research is aimed at countries that havemarket-based financial systems like those of the US and the UK.

There is an extremely small

amount of research relating to informal investors in countries that have a bank-based financial
system such as Germany and Japan.

In countries with a bank-based financial system such as Japan,

a way of thinking about equity finance on the side of capital seekers (businesses) largely differ, andthe number of capital providers (investors) is quite small.

Therefore it is necessary to find different

approaches to promoting the informal venture capital market.

Regarding this point, there are

already a number of interesting studies that show informal investors are not homogenous (Gaston
1989, Landström 1992, Freear, Sohl and Wetzel 1994, Coveney and Moore 1998, Sörheim andLandström 2001).

Of these, Landström (1992) focused on Sweden and took a wider definition for

his analysis than the research that focused on the US and the UK.

Therefore the significance of his

research when considering the policy implications for countries with a bank-based financial system
makes this an extremely interesting study.

2

In his paper, four categories of informal investors are

Small sum investments of less than $250,000 in venture capital firms make up only 5 percent of thecases, while investments of this size in informal venture capital form 58 percent of the total.

Certainly,

the supply of small-scale funds plays an important role in informal venture capital investment.

In theinvesting stage too, investments in the seed and start-up stage by venture capital firms account for only 28
percent of the cases, while informal venture capital investments account for 60 percent of the total.

4

given.

One of these, “individuals in the firm’s business environment” is one where even though theinvestment is infrequent and of a small amount, it is still possible, even in countries where the equity
finance system for new businesses is not well developed, for the investment to grow enough for it to
be a viable investment.

Moreover, as Bygrave et al. (2003) analyzing informal investing in 29

nations pointed out, German informal investors have a different investing style than US and UK
investors.

Also they pointed out that research on formal venture capital firms and business angels

as professional investors has increased substantially, but informal investors other than professional
business angels are almost ignored.

So, it is important to investigate the activities of informal

investors other than professional business angels (e.g. family, relatives, friends and businessassociates), especially in a country other than the US and the UK.
This paper pays special attention to the role of small business managers as latent informal
investors in a country with a bank-based financial system, while undertaking an analysis of theactual state of business start-up support.

Specifically, it consists of four analyses.

Firstly, we

estimate probit model for what types of small business managers actually provide business start-up
support.

Secondly, within those managers, we analyse what types of managers provide “financial”

support to business start-ups.

Also we consider the importance of the data that only businesses who

have provided business support can obtain information about businesses for which they provided
support. Taking this into account, we do probit model estimation with sample selection.

Thirdly,

we estimate probit model for what types of managers who have an intention to provide businessstart-up support in the future.

Lastly, we verify whether the start-up support provided by small

business managers has an effect on the performance of a supported business after the start-up.
Generally speaking, together with the traditional type of venture capital firms (i.e. classic venture
capital) that puts a greater emphasis on investment in the early stages, informal investors offer alarge contribution to the improvement of the performance of investee companies through the5hands-on investment of informal investors.

However, literature that deals directly with therelationship between the performance of the business that receives the investment and informal
investing is extremely limited.3

Moreover, a small number of studies that did analyses on a

descriptive statistics level that were based on small samples in limited situations cannot be used (e.g.
Mason and Harrison 1996).
The structure of this paper is as follows:

Section 2 provides a general overview of thecurrent status of Japanese equity financing, so that we can gain an understanding of the Japanesebackground. Section 3 describes the characteristics of the data from the informal investing survey
analysed in this paper.
empirical analysis.

In Section 4, we define the explanatory variables that are used in the

Then in Section 5, the results are presented.

Also in Section 5, using not only

data from the informal investing survey but also data from the survey of new business start-ups, we
try to analyse of the relationship between the performance of the business that receives theinvestment and informal investing.

In Section 6, we summarize our evidence and some

implications for policy-makers and researchers.

2. Japanese Background
Compared with the US and Europe, especially with the US, it is difficult for businesses to start up in
Japan or to succeed after start-up.

Japan’s business start-up rate since the 1980’s has been aroundthe extremely low level of 4 percent, and since the 1990’s the business start-up rate has dropped
below the business failure rate.

In OECD surveys and in the Global Entrepreneurship Monitor(GEM) carried out by the London Business School and Babson College, Japan’s entrepreneurial
activities as well as the level of entrepreneurial activity support was placed in the lowest position of
3

There are some researches that deal with the difference between the hands-on and hands-off investment

styles and its relationship with the performance of the business that receives the ‘formal’ venture capital
investment (e.g. MacMillan et al. 1989, Fredriksen et al. 1990, Hellmann and Puri 2002).

6

the countries surveyed (OECD 2000, Reynolds et al. 2001).

This can be attributed to various

reasons, but one important factor is the number of financial constraints, particularly the weakness offormal and informal venture capital investment activities.

However, to construct a smooth supply

system for equity capital it is necessary to overcome the problems in both the supply side and thedemand side of investment capital.

Also, it is necessary to consider a promotion policy that takes

into account the distinctive characteristics of both sides.

2.1 Demand Side of Equity CapitalFirstly, if we look at the current situation of the demanders of capital (the business side) in Japan
with its bank-based finance system, we can see that the spread of equity finance is lagging behind.
If we compare the capital structure of Japanese businesses by the scale of the business, the ratio of
equity to total assets for large businesses with capital stock of more than ¥1 billion has been rapidly
increasing since the mid-1980’s and presently exceeds 30 percent (Japanese Ministry of Finance).
While its ratio for small and medium businesses with capital stock of less than ¥1 billion has notchanged from 1965 until the present at a rate of only 10-15 percent.

In Japan, raising capital forsmall businesses has tended to depend on bank loans, and mostly avoided raising capital throughequity financing.

Compared to this, for example in the US where equity financing is welldeveloped, the degree of dependence on bank loans is low and the ratio of equity to total assets isover 40 percent for all types of businesses (U.S. Department of Commerce).
This low equity ratio is mainly based on the historical development process of theJapanese financial system that emphasizes bank financing and is well-known as the main banksystem.

Under this long-established bank-based financial system, Japanese small businesses havebeen negative for equity financing.

For example, in a recent survey conducted by the Small

Business Administration (White Paper 2002, pp.155-157), for small businesses with less than 100

7employees, those who have engaged in direct financing accounted for less than 3 percent.4

But

almost 80 percent answered that they don’t use direct financing and don’t intend to. As the reason
for not wanting to use direct financing, 40-50 percent answered that they are satisfied with indirect
financing or they want to maintain a good relationship with their current main bank.

Aconsiderable share (25 percent) of small businesses answered that they don’t want an outsider to be
involved in their management.

2.2 Supply Side of Equity Capital
According to the Venture Enterprise Center’s latest research report (Venture Capital Center 2002), as
shown in Table 1, Japan’s formal venture capital investment in the early stages of growth has
increased rapidly.

Currently the investment in businesses in the period from start-up to less than 5

years after start-up accounts for 36 percent of the number of cases and 50 percent of the money
invested.

However, the percentage of investment in the start-up stage is as small as ever (only 13

of 2028 investments).

Even the high investment rate in companies from start-up until five years

after start-up can be attributed to the high rate of investment in about 700 companies.

Furthermore,

if we look at the average investment amount per investment, these businesses, which have start-up
capital of around ¥30 million and within 5 years have close to ¥80 million in capital, are certainly
not small-scale.

This shows that formal venture capital has a limit in its ability to handle

small-scale investments.

This in no way differs from the situation in the US and Europe.
[Insert Table 1 about here]

Informal venture capital can hopefully fill this gap but Japan’s informal investing is, for4

Direct financing here refers to raising capital from the stock markets, accepting formal and informal

venture capital, issuing public bonds or commercial paper, etc.

8

example in the GEM survey, placed at 25th out of 29 countries surveyed.5

In Japan, primarily

because there are no comprehensive surveys or calculations of the total scale of the informal venture
capital market, it is impossible to make accurate comparisons. But we can speculate that informal
investing is not as vigorous as that in the US and Europe (e.g. Tashiro 1999, p.271).

With the aimof promoting informal investing in Japan, an “Angel Tax System” was established in June of 1997.
Even this from its establishment until 5 years later at the end of August 2002, had been used by only
16 companies on a total of 246 occasions, still quite a low standard.6

However, when considering

the limits of the range of investments that were appropriate for formal venture capital especially inJapan, it was strongly expected that informal venture capital would play an important role in the
reduction of the equity gap in the seed and start-up stage.
There are a number of reasons for this difference in the vigorousness of informal investing
activities.

(1) In Japan there are few investors who have enough assets or capital to be able toengage in informal investing.

(2) In the US and Europe there are many people who made theirfortunes in business start-ups and then became informal investors.

But in Japan it is quite rare.

(3) In Japan, the framework for harvesting (i.e. to list on the stock market in the short term or to sell
the start-up for a high price and give a return to investors that corresponds with the risk taken) does
not exist or does not function as necessary.

5(4) There are insufficient favorable conditions in the

There are some possibilities of inconsistency in how the surveys were done in different countries andhow the questions were interpreted by respondents.
6

In addition, since the present angel taxation system offers measures against not the investment time but

the result of investment (gains from the transfer of property or transfer loss) and its application isfollowed by a time lag, there are still no cases where the preferential treatment measure of the taxation
system has actually been applied. 246 cases of investment have received certification by the Ministry of
Economy, Trade and Industry (METI) for satisfying the requirements for the application of the Angel
Taxation System.

Although this is not discussed in detail since it is a diversion from the course of theargument, revision of the Angel Taxation System is a necessary condition to promote informal venture
capital investment.

9

tax system for informal investing.

(5) The provision of a matching system for entrepreneurs andinformal investors is inadequate.
However on the other hand, in Japan, there have long existed systems and practices for
self-supporting business start-ups centered on small businesses.

Of course these types of start-ups

are generally of a small scale and there are few actual cases where there is an intention to go publicfrom the very start.

The type of assistance also tends to center on introductions of financial

institutions or traders, or on management advice and guidance rather than direct capital support.
The important thing here, however, is that there is the possibility of effectively engaging in businessstart-up support of a type a little bit different from that in the US and Europe through small business
managers utilizing their own assets as well as their previous business experience and contacts toengage in start-up support. In fact, according to the New Business Start-up Survey in 1999, morethan half of business start-ups received some type of support from small business managers at thetime of start-up.

This type of business start-up support by small business managers looks extremely

promising for the formation of a pool of latent informal investors in countries like Japan withbank-based financial systems and small-scale informal investing. Moreover, compared to the US
and European style informal investors, although it tends to be inferior in regard to the scale offinancial support, this type of business start-up support by small business managers is certainly notinferior in regard to the hands-on capacity to provide management know-how and contacts.

Inaddition, if we consider a large number of small businesses in Japan, there is even the potential forthis type of support to function as the most effective type of business start-up support.

3. DataIn this Section, as preparation for the analysis that follows, we describe the characteristics andhandling of the data from the Survey of Business Start-up Support by Small Business Managers

10which is the main source of data used in this paper.

This survey is a questionnaire-based survey

carried out in August 1999 by the Research Institute of the National Life Finance Corporation, whichis the government agency which provides loans to small businesses.

The focus of this survey was

the 11,985 companies with more than three years in business that, as of January 1999, had been
receiving loans from the National Life Finance Corporation.

The number of responses was 4,233

and the response rate was 35.3 percent. However, not all of these can be used in this analysis, so it
is necessary to first single out a sample of just the responses that answered the applicable questions.
In this paper the questions from the survey that we focus on are:(1) Have you provided business start-up support? (Question 9)7(2) Have you provided financial support such as capital or loans? (Question 11)8
(3) Do you intend to provide business start-up support? (Question 38)9In our analysis, firstly, for the business start-up support by small business managers in (1)and (2), we combine this with the results from asking when the support occurred (Question 12) andconsider the following question that they have provided support in the last five years since 1995.
This was actually asked in Question 9 - whether they have engaged in business start-up support.
7

The contents of Question 9 are as follows: Have you given any form of assistance (excluding thatoffered as part of your companies’ activities such as taxation advice by licensed tax accountants,
management advice from management consultants, or temporary personnel from human resource firms)
to new companies that have yet to be founded or have been established for less than a year?
8

The contents of Question 11 are as follows: Answer only if you answered yes for Question 9.

Pleaseanswer by choosing all the actual details of the support. For those who have supported two or more
entrepreneurs or companies in the start-up stage, please select the latest (the choices are the 18 items in
Figure 1, plus others).
9

The contents of Question 38 are as follows: What is your intention for supporting entrepreneurs orcompanies in the start-up stage in the future?

1) We want to actively provide support. 2) We would

consider it if the conditions were satisfied. 3) We are not interested in providing support. 4) We
absolutely don’t want to provide support.

11But if we use this question as it is, businesses who have engaged in support in the distant past cananswer yes to Question 9 the same as businesses who have done so recently.

So this is not suitable.

Also, Question 11 only asks about the latest case of support, so where a number of businesses areprovided with support, only the information about the latest business that received support can beobtained.

Therefore, we conclude that it is necessary to have the focus period as close to thepresent as possible.

Moreover, to achieve consistency, we make the focus of the analysis only

businesses founded before 1995, and for the variables for managers’ ages and years since
establishment used in the analysis, we will use the age and number of years for each as of 1995.
Besides that, to avoid the possibility that they do not know the situation of their business at the timeof establishment, we have to take into account the possibility that the person responding had engaged
in support before I becoming a manager, and also the analysis about whether their own companies
received support when I founded.
original manager.

To do this we select only the cases where the manager is theConsequently, the focus of our analysis is narrowed down to small business

managers who have experience with their own business start-ups.

This is preferable to the focus of

the analysis of US and European informal investors that mainly consists of those who haveexperience of others’ business start-ups.
[Insert Figure 1 about here]
As a result, the size of the sample used in our analysis becomes 1,995.

Within that there

are 150 cases (7.5 percent) where the respondents had engaged in business start-up support in thefive years from 1995 to 1999.

Figure 1 shows what type of support these 150 cases actuallyengaged in. We can see that there are various types of support and that, above all, soft management
resource support such as advice on management, the introduction of suppliers and clients, andguidance in the use of technology, is becoming more common.

Also, at the bottom of Figure 1,

those respondents who answered that they had engaged in one of the following - providing capital,

12

providing a loan of start-up funds (with interest or interest-free), offering collateral, acting as
guarantor on a loan from a financial institution - are regarded as having engaged in financial support.
The rest are regarded only as non-financial support. As a result, within the 150 cases, financial
support accounted for 61 cases (40.7 percent) while only non-financial support accounted for 89
cases (59.3 percent).10,11
Lastly, in regard to the intention to engage in business start-up support in the future(Question 38), if we combine those managers who answered that either they wish to actively provide
support or they would consider providing support if the conditions were favorable, we get a total of
66.2 percent (about two-thirds) of small business managers who have an intention to provide
business start-up support.

4. Variables
The explanation of each explanatory variable used in the analysis of (1) through to (3) as shown in
the previous section is as follows.

Also, each variable’s definition and mean is shown in Table 2.
[Insert Table 2 about here]

4.1 Manager’s Age and Gender
Considerable previous research has shown that informal investors are mainly middle-aged people
around 50 years old.

For example, according to Gaston (1989a), US informal investors arenormally a little under 50 (average age is 47), overwhelmingly male (95 percent), and with a highpercentage of business experience (83 percent).

10

UK informal investors are a little older (average

In addition, having engaged in financial support also includes non-financial support. There were 24

out of 61 cases like this.
11

This applies not only to financial support, but also capital investment is a notable part of support

activities. However, since there have been only 32 cases of capital investment in the last five years, they
have been omitted for the empirical analysis.

13age is 53) compared to US investors, and the percentage with business experience is relatively low(57 percent).

Overall, they tend to be middle-aged men with business experience (Mason andHarrison 1994, Harrison and Mason 1996).
In our analysis, the mean age of small business managers is 50.3 years.

But, if we look at

the managers with business support experience, the mean age is 45.6 years, about 4.7 years younger.
Although it’s not shown in a table, if we look at a breakdown by age, we can see that those managers
with business support experience are younger.

Furthermore, in our analysis, only 5 percent offemale business managers intended to provide support in the future.

However, a large percentage

difference between this and whether they have provided support in the past was not observed.
Therefore this bias can be regarded as reflecting the small percentage of females who hold positions
as small business managers.
asexplanatory

variables.

Thus in our empirical analysis, managers’ age and gender are included
MANAGER_AGE

GENDER_FEMALE is the dummy variable.

is

small

businessmanager’s

age,

and

If the manager is female, it is 1, and male is 0.

4.2 Firm Size, Firm Age, Industrial Category, and Business Conditions
These variables were not used in past research as foreign research focused on the “individual”
informal investor.

However, in this study, because the analytical focus is on all small business

managers, by using these variables we can test whether or not there are differences in the businesssupport activities depending on the firm size, firm age, and industrial category of the supporting
manager’s own business. Furthermore, it is limited to businesses which have engaged in support
and we know the business conditions of the business when support was given (Question 13).

So it

becomes possible to control directly the variable of the business conditions of the business at thetime support was given in the financial support analysis.

For the firm size (FIRM_SIZE), we canuse the natural log of the total number of employees, which can be calculated from one of the survey

14questions, plus the managers themselves.

FIRM_AGE is years since establishment.

For theindustrial category we use six categories of manufacturing, wholesale, retail, food and drinking,construction, and service. MANUFACTURE, WHOLESALE, RETAIL, FOOD, CONSTRUCTION,
and SERVICE are dummy variables for each industrial category.

BUSINESS_GOOD is a dummy

variable where if the business conditions in that industry at the time of support are quite good or
good=1.

If they are not good=0.
Each distribution is shown in Table 2. As the target group of the survey was small

businesses financed by the National Life Finance Corporation (a government institution thatspecializes in small business finance), the number of employees would probably reflect this quality
and have a high percentage of fairly small-scale businesses.

Moreover, if we compare the overall

distribution with the distribution of businesses with support experience, those businesses withsupport experience have, on average, more employees and the number of years since establishment
is fewer.

4.3 Received Support at Start-up
As opposed to formal venture capital firms, informal investors are not necessarily investing just for
financial reward.

For example, according to Mason and Harrison (1994), the typical motivation for

an informal investor is a high capital gain.

But, it is also shown that at the same time there are

non-profit motive reasons like wanting to contribute to the start-up process and wanting to support
goods and services of benefit to society. In the case where they themselves received support for
their start-up, it is expected that this tendency is even more pronounced.

Based on this view, we

use whether they received support for their own company at start-up as an explanatory variable of
RECEIVED_SUPPORT.

Then we try to verify whether there is a tendency or not for business

managers who received support for their own start-up to engage in business start-up support15

themselves. If we look at Table 2, managers who had experience with business start-up support
occupied a larger percentage of those managers who had received start-up support themselves whencompared with the overall trend.

Overall was a little less than 40 percent, while those with support

experience were about 50 percent.

4.4 Same Industrial Category
In previous research such as Gaston (1989a) it has been shown that a large number of informal
investors are people with business experience or who where involved in business through their own
investments. Above all, it is essential to have technical knowledge in the type of business that is to
be invested in to provide hands-on investment that plays a serious part in the management side of thebusiness.

Thus we can expect that business support will center on businesses of the same type asthat of the supporter.

In our analysis by including the same industrial category dummy variable of

SAME_INDUSTRY (if the supported business is of the same type as the supporter=1) as an
explanatory variable, we can verify whether having experience and technical knowledge in the typeof business they are supporting has an effect on the support activities.12

However, like the previous

business conditions dummy variable of BUSINESS_GOOD, we can only observe the cases of those
who have engaged in support.

So this variable can only be used in the financial support analysis.

If we look at Table 2, we can see that two-thirds of managers support start-ups of the same type ofbusiness as theirs.

4.5 Relationship with the Supported Entrepreneur
In previous research regarding the source of information about informal investors, it was found that

12

Industrial type matching was conducted using the same 6 industry-type bases as the previous industrial

category dummy.

16

in many cases informal investors were friends or business associates (Mason and Harrison 1994).
Furthermore, if we consider the importance of the receiving and storing of confidential informationthat is needed to make investment decisions, then we can foresee that there will be a strong tendency
to support entrepreneurs that informal investors have known for a long time.

In the same way, inthe case where the manager of the business to be supported is a former director or employee of the
supporting business, or a relative or family member of the manager, then the gathering of
information necessary for informal investors to make an investment decision can proceed smoothly.
We can expect that there will be many cases that result in support proceeding. Considering thispoint in our analysis, the relationship with the supported business’s entrepreneur and length ofacquaintance with the foresaid entrepreneur will be included as explanatory variables.
categories will be as follows:

The actual

For the relationship with the supported business’s entrepreneur, four

categories, i.e. a former director or employee of the supporting business (EMPLOYEE), themanager’s family or relative (FAMILY), a third party introduced by an acquaintance (FRIEND), andothers (OTHERS) will be used.

For the length of acquaintance, 3 categories, i.e. less than one year

(YEAR1), 2-9 years (YEAR2-9), and over 10 years (YEAR10) will be used.13
shown in Table 2.

Each distribution is

It is interesting to note that it is not just former directors or employees, andfamily or relatives of the manager, but also those introductions from a third party that account for 15
percent.

4.6 Distance from the Supported Business
Formal venture capital investment tends to be concentrated in financial centers or in areas where

13

Here, to correspond with the European and US-type informal investors, cases where support has been

given to family members should not be included in the analysis.

However, this paper did not take thisstance, and instead emphasized the framework encompassing the entire range of support provided bysmall business managers and thus included support to family members.

17

venture enterprises are concentrated.

It has been shown that informal investors have an importantrole to play as a supplier of equity capital to regional businesses (Mason and Harrison 1991, Mason
and Harrison 1995b).

Furthermore, according to Gaston (1989a), US informal investors have astrong tendency to invest in businesses close to their home or office.
less than 50 miles away makes up 72 percent of the total.

This investment in businesses

UK informal investors, in the same way

as those in the US, also tend to specialize in a region and their investment in businesses within 50
miles of their home or office makes up 54 percent of the total (Mason and Harrison 1994, 1995a).
In our analysis, we control the difference in the distance from the supported business.
Specifically, we use three groups, i.e. same city or county (SAME_CITY), same prefecture(SAME_PREFECTURE), and different prefecture (DIFFERENT_PREFECTURE).

If we look at

Table 2, we can see that on the one hand, the support for businesses within a short distance (samecity or county) makes up the majority. On the other hand, the number of cases of support to adifferent prefecture also makes up a reasonably large share of 14.7 percent.

5. Empirical Analysis
5.1 Business Start-up Support by Small Business Managers
Firstly, we estimate the probit model that tests what types of small business managers have atendency to provide business start-up support.

Dependent variable is the dummy variable if having

engaged in start-up support in the last five years=1, and having not engaged=0.
[Insert Table 3 about here]
The results are shown in Table 3.

The sign of coefficient on manager’s age(MANAGER_AGE) is significantly negative, firm size (FIRM_SIZE) is positive, and own company
received support at start-up dummy (RECEIVED_SUPPORT) is positive.

Thus, we can say thatyounger managers of relatively larger-scale small businesses, who received start-up support18

themselves, are more likely to provide business start-up support to others.

However, differences ingender (GENDER_FEMALE), years since establishment (FIRM_AGE) and business type (eachindustrial category dummy) did not reveal any significant results.

In fact, FIRM_AGE showed asmall tendency to the negative, so businesses that have only recently started operations have a small
tendency to be more active in support.

5.2 Financial Support by Small Business Managers
Next we do a probit model estimation with sample selection that aims to find who conduct financial
support within those small business managers that provide business start-up support.

This deals

with detailed information about the supported business that can only be obtained for businesses thathave provided support.

In other words, when we investigate the details of the support, not only area sample of managers who have provided support used, but we also have to consider the process ofsample selection as to whether they provided support or not.14

Specifically, the two equations

below are estimated by using Full Information Maximum Likelihood (FIML).

Equation 1 is whattypes of small business managers provide financial support (sample size is 150).

Dependent

variable is the dummy variable for those who conducted financial support within those businesses
who provided support since 1995=1, and for other=0. Equation 2 is what type of small business
managers have a tendency to provide business start-up support (sample size is 1995).

Dependent

variable is the dummy variable for having provided support since 1995=1, and for other=0.
Within these, Equation 2 formulizes the sample selection process to test whether they haveprovided support.

While Equation 1, with the selected sample as the base, formulizes the selection

process to examine whether they have provided financial support.

14

In addition, the structure ofPlease refer to Wynand and Praag (1981) and Boyes, Holffman and Low (1989) for the probit modelwith sample selection.

19

Equation 1 is exactly the same as the model in the previous section.

In fact, the explanatory

variable for the characteristics of the supporting company like firm size is not included in the financeand non-finance selection section.

Moreover, using the formula for the finance and non-financeselection as a factor that can only be observed in businesses with support experience, we can use thedummy that business is performing well or not, which considers the more direct factors involved indetermining whether to provide financial support.

Therefore, a number of other variables relating

to the potential multicollinearity problems that can be seen in the supporting business’s
characteristics were dropped from the formula (Reid and Smith 2000).15[Insert Table 4 about here]
The results are shown in Table 4. ρ is the value of the correlation coefficient of theerror term for both models.

The sample selection condition formula of Equation 2 has almost thesame results as Table 3.

The sign of coefficient on Equation 1’s same industry dummy(SAME_INDUSTRY) is statistically negative, business conditions dummy (BUSINESS_GOOD) is
positive, and the manager’s family or relatives dummy (FAMILY) is positive.

Moreover, although it

is not statistically significant, we can see that the sign of coefficient on close distance to supported
business (SAME_CITY) is positive, and that less than one year since meeting (YEAR1) is negative.
Of these, the result that the same industrial type dummy is negative is particularly important.
Start-up support for businesses of the same type essentially allows the manager to directly utilize his
experience and technical knowledge, as well as making it possible for the manager to make arelatively better judgment as to whether to provide capital support or not.

In spite of these merits, if

there is a mismatch in the pairings of informal investors and entrepreneurs, there is still room for an
improved method.
15

Theoretically, the explanatory variables of these two formulas do not necessarily have an inclusive

relationship. If each has been essentially formulized differently, then they can be decided accordingly(Vella 1997).

20

5.3 Intention to Provide Support in the Future
To identify what types of small business managers intend to provide business start-up support in the
future, we do the following probit model estimation. The make-up of the explanatory variable isexactly the same as in Section 5.1.

Dependent variable is a dummy variable where having an

intention to provide business start-up support in the future=1, and other=0.
For Question 38, the responses about supporting an entrepreneur or a business being
established in the future are divided into the following four answers. 1) We would actively like toprovide support.

2) We would consider providing support if the conditions were favorable.

are not interested in providing support.

4) We absolutely don’t want to provide support.

3) WeIn ouranalysis, answers 1) and 2) are regarded as having an intention to engage in start-up support in the
future. The empirical results of the ordered probit that considers the differences in answers from 1)to 4) is shown in the Appendix, but large differences in the empirical results could not be seen.
Moreover, although it could be regarded as an exception from the analytical focus group of those
who had actually provided support (sample size is 150), because the sample is less than 10 percent of
the total, the results don’t change much whichever sample is used.

Here we show only theempirical results that include the cases where actual support was provided.
[Insert Table 5 about here]
The results are shown in Table 5.

The sign of coefficient on manager’s age(MANAGER_AGE) is significantly negative, firm size (FIRM_SIZE) is positive, and the received
business support at own start-up dummy (RECEIVED_SUPPORT) is positive.

Therefore, in thesame way as the results in Section 5.1, it is shown that younger managers of relatively large-scalebusinesses who received support for their own business at start-up, are more likely to form a pool oflatent informal investors.

21

5.4 Performance of the Supported Business after Start-up.
Lastly, we analyse the relationship between start-up support by small business managers and theperformance of the business after start-up.

Firstly, based on the same three analyses used before for

the Survey of Business Start-up Support by Small Business Managers, we will examine whether
financial support has an effect on the performance of the business after start-up. Table 6 shows thecurrent (as of August 1999) business conditions of the supported business (Question 23) and theeffect of the small business manager’s support on the supported business (Question 32).

There

doesn’t appear to be a clear relationship between financial support and business success after
start-up.
[Insert Table 6 about here]
In fact, as we are limited to the data from this survey, we cannot verify whether thedifference between the type of support (financial or non-financial) has an influence on the success ofthe business when compared to other businesses that also received start-up support.

Originally, wesought to verify whether businesses which received support (including financial and non-financial)by small business managers at start-up showed any difference in post-start-up performance.

Thus,

additionally, data was used from the New Business Start-up Survey in 1999 conducted by the same
Research Institute of the National Life Finance Corporation.

This survey focused on the 7,304

small businesses that had received a loan from the National Life Finance Corporation in the first halfof 1998 and that at the time of receiving the loan were less than one year old (includes pre start-up
businesses).

The number of responses was 1,682. Although the New Business Start-up Survey

had been conducted every year since 1991, only the 1999 survey asked details such as those in theSurvey of Business Start-up Support by Small Business Managers about whether they received
support from small business managers at start-up.

22

The results of the survey were that of the 1,262

businesses that answered, 52.1 percent had received support while 47.5 percent of those that hadreceived support answered that they had received financial support. That is, more than half hadreceived some type of support from small business managers at start-up, and within those, close tohalf received financial support.
Specifically, using this data and based on Harada’s (2003) framework, we do a probit
model estimation that identifies the relationship between start-up support and post-start-up success.
As a measure of start-up success, following Harada (2003), we use the current monthly business isgreater than the monthly business target before start-up=1, i.e. we use a dummy variable whose baseis whether the current monthly business attained the goal set before start-up.

In the New BusinessStart-up Survey, quantitative indices like the sales growth rate and the return on total assets cannot
be used because of the limited types of surveyed items.

For the explanatory variable, like Harada(2003) we use the following dummy variables: entrepreneur’s individual characteristics (age at timeof start-up (ENTREPRENEUR_AGE), gender (GENDER_FEMALE)), and business characteristics
such as amount of start-up capital (STARTUP_CAPITAL), months since start-up (FIRM_AGE), six
industrial category dummies.

In addition to these, we use a second, new type of dummy variable

whether they have received support from small business managers, specifically, received some typeofgeneralsupport=1(FINANCIAL_SUPPORT).

(GENERAL_SUPPORT),

andreceivedfinancialsupport=1

From this, the median age at the time of start-up was 40.5, 11.5 percentof the total were female, and the median for the amount of start-up capital and number of months
since start-up were ¥16.9million and 18.6 months, respectively.
[Insert Table 7 about here]
The analysed results are shown in Table 7. For either of the two cases there were no
significant outcomes of post start-up success due to the start-up support of small business managers.
This result shows that at the present point in time, there are no noticeable effects on the post start-up

23

success of a business that had received start-up support from small business managers.

This is thesame result as that of a number of studies about the connection between the hands-on type
investment of US and European venture capital firms and the success of the business (MacMillan,
Kulow and Choylian 1989, Fredriksen, Olofsson and Wahlbin 1990).

This point could show that thecapacity of small business managers to provide start-up support is not necessarily sufficient.

Or it

could also show that opportunities to meet with entrepreneurs who could utilize their potential are
limited.16

In the previous case, the acquiring and improvement of the individual supporters’

support skills becomes an issue. But in the latter case, through a better organized structure forgathering information and a better organized matching process, perhaps it is possible to create an
improvement.

6. Concluding Remarks
This paper sought to demonstrate the possibility of small business managers acting as latent informal
investors to support business start-ups.

Specifically, using the data from the Survey of BusinessStart-up Support by Small Business Managers in 1999, we sought to verify the following:(1) Whattypes of small business managers actually provide business start-up support?

(2) Within thosemanagers, what types of managers provide financial support to business start-ups?

(3) What typesof managers have an intention to provide business start-up support in the future?

In addition, using

the data from the above survey as well as from the New Business Start-up Survey in 1999 (as data forthe businesses that were invested in), we also sought to verify whether the business start-up support
provided by small business managers has an effect on the success probability of the supported

16

Another reason is the formulization of the model.

For example, it is possible that the performanceindex on which the model was formulized was not sufficient. However, when another index, dummy
variable whether business is in the black used by Harada (2003) as well as in the 1999 survey, was adependent variable, no significant results could be obtained for the two types of business start-up support.

24business after start-up.
The results of the probit estimation showed that small business managers whose age isyounger, of relatively larger small businesses that had received support for their own businessstart-up, were more likely to provide business start-up support.

However, in relation to financial

support, it was shown that there was a strong tendency to support different business types or familyor relatives’ start-ups over start-ups that were of the same type as that of the manager and could
utilize their experience and know-how. Furthermore, it was shown that there was a tendency for
managers’ intentions to provide business start-up support in the future, to be the same as their current
level of start-up support. These results suggest that the creation of a start-up support network
centered on small business managers who are currently active in business and are also relatively
young, and feel grateful for the support they received when they were a start-up, will lead to benefits
not only for the directly supported business but also, in the long term, it will contribute to the spreadof start-up support through the supported company. However, at the present time, small business
managers who had received start-up support did not achieve better results after start-up.

Thissuggests that for a country like Japan where the informal venture capital market is still being
developed, there is a need for informal investors to improve their individual support skills.
Although there is an abundance of research that analyses the performance of businesses that receive
formal venture capital investment, there is insufficient research into the performance of thebusinesses that receive informal venture capital investment.

It is clearly necessary for future

research to compare and analyse the performance indicators of businesses who have received
informal investment and those who provide angel support.
Of course we can also consider that the performance of the business receiving theinvestment is not just an issue of the skills of informal investors, but it is also affected by the
problem of matching investors with suitable businesses.

25

It is therefore necessary to have a more

organized approach to the matching process as well as to things like the improvement in quality andquantity of information for informal investors and business start-ups. Certainly at the present time
the small business manager’s support is mostly non-financial.

Even in cases where financial

support is provided, it is normally with the expectation of making a capital gain, which is a clear
distinction from US and European informal investors. Furthermore, in Japan the development of a
network to connect informal investors with business start-ups has only been happening for a
relatively short time.

Compared with networks like the Angel Capital Electronic Network(ACE-Net) in the US and the Business Angel Networks (BANs) in the UK that are diverse andoperate on a national level, Japan’s network is perhaps 10 to 15 years behind (Ace and Tarpley 1998,
Mason and Harrison 1997, Harrison and Mason 1996, Mason and Harrison 1997).

However, forcountries with a bank-based financial system, the US and UK type of informal investing are notnecessarily the most suitable approach. As we have seen in this paper, even in Japan with its
bank-based financial system, the support of business start-ups by small business managers is of ascale that cannot be ignored. Therefore in the future, if the creation of an informal investors
network that reflects Japanese characteristics progresses and if the growth of the markets for
harvesting continues, we can then speculate that small business managers with an intention to
engage in start-up support will provide start-up support more like that of the US and UK type of
informal investors.

Whatever the case, for countries that, unlike the US and the UK, have abank-based financial system, it is not only necessary to aim to expand the pool of latent informal
investors, but also to continue research on small business managers’ activities.

If we keep in mind

that informal investors are extremely diverse, we can, through the promotion of research on the roleof small business managers as latent informal investors, offer meaningful suggestions to countries
whose informal venture capital markets are still in the early stages of development.

[2003.9.16 661]

26

Appendix[Insert Table about here]

Acknowledgements
We thank Noriyuki Takahashi of Musashi University and Richard Smith of Claremont Graduate
University for their helpful advice.

We also thank seminar participants at Kyoto Research Park fortheir useful comments on the earlier version of this paper.

All the data used in this paper was madeavailable from the National Life Finance Corporation through the Japanese Society ResearchInformation Center of the Social Science Research Institute at the University of Tokyo.

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30

Table 1 Formal Venture Capital Investments in Japan (Oct. 2000-Sep. 2001)
Amount (100Average
Investment Stage
No.
%
million yen）%
(1million yen)
Start-up
13
0.6
4.1
0.4
31.2
less than 5 years
730
36.0
564.8
50.0
77.4
5-10 years
637
31.4
275.2
24.3
43.2
10-15 years
318
15.7
110.2
9.7
34.6
Over 15 years
330
16.3
176.2
15.6
53.4
Total
2028 100.0
1130.3 100.0
55.7
Number of responses is 53.
Source: Venture Enterprise Center (2002).

Table 2 Definition of Explanatory Variables

Explanatory variable
MANAGER_AGE
GENDER_FEMALE
FIRM_SIZEFIRM_AGE
Industrial Category
MANUFACTURE
WHOLESALERETAILFOOD
CONSTRUCTIONSERVICERECEIVED_SUPPORTDefinition
Small business manager's Age
A dummy variable where if the manager isfemale=1, male=0
Total number of employees
Years since establishment

Manufacturing=1, other=0
Wholesale=1, other=0
Retail=1, other=0
Food and dringking=1, other=0
Construction=1, other=0
Service=1, other=0
A dummy variable where if the business received
support at the time of start-up=1, if not=0
A dummy variable where if the business conditions
BUSINESS_GOOD
in that industry are good=1, if they are not good=0
A dummy variable where if the supported business
SAME_INDUSTRY
is of the same industry as the supporter=1, if
different industries=0
Relationship with the Supported Entrepreneur (Type)The supporter's company's former director or
EMPLOYEE
employee=1, other=0
FAMILYManager's family or relative=1, other=0
A third person introduced through an
FRIENDacquaintance=1, other=0
OTHERS
Other=1
Relationship with the Supported Entrepreneur (Length)
YEAR1
Less than one year=1
YEAR2-92-9 years=1
YEAR10Over 10 years=1
Distance to the Supported Business
SAME_CITY
Same city or county=1
SAME_PREFECTURE
Same prefecture=1
DIFFERENT_PREFECTURE Different prefecture=1
Sample size

31

Mean
With support
Overallexperience
50.3
45.6
6.8
7.2
16.6

5.3
11.2
12.8

15.8
8.0
18.4
7.6
19.2
31.0

13.3
9.3
13.3
7.3
18.7
38.0

38.8

50.0

-

35.3

-

66.7

-

15.3
8.0

-

14.7
62.0

-

13.3
41.3
45.3

-

51.3
34.0
14.7
150

1995

Table 3 Start-up Support by Small Business Managers (Probit Model)
Dependent Variable: have provided start-up support in the last 5 years=1
Coef.
t-valueSig.
Constant-0.6961-2.41 *MANAGER_AGE-0.0230-3.93 **GENDER_FEMALE-0.0706-0.38
FIRM_SIZE [=log (number of employees+1)]
0.19204.40 **
FIRM_AGE-0.0060-1.09
RECEIVED_SUPPORT
0.2242
2.57 *
MANUFACTURE
WHOLESALE
0.1402
0.76
RETAIL-0.0448-0.28
FOOD-0.0530-0.27
CONSTRUCTION
0.0111
0.07
SERVICE
0.1423
1.04
Log likelihood-498.4
MacFadden R-squared
0.0638Sample size
1995
* significant at 5%** significant at 1%

32

Table 4 Financial Support by Small Business Managers (Probit Model with Sample
Selection)
Equation 1. Dependent variable: have provided financial support=1
Coef.
t-valueSig.
Constant-0.1611-0.23
SAME_INDUSTRY-0.5442-2.09 *
BUSINESS_GOOD
0.59302.49 *EMPLOYEE
0.36101.03
FAMILY1.13042.32 *FRIEND
0.5281
1.22
OTHERSYEAR1-0.3803-0.88
YEAR2-9
YEAR100.07000.26
SAME_CITY
0.2570
1.00
SAME_PREFECTURE
DIFFERENT_PREFECTURE-0.2150-0.58
Equation 2. Dependent variable: have provided start-up support in the last 5 years=1
Coef.
t-valueSig.
Constant-0.6957-2.38 *MANAGER_AGE-0.0232-4.09 **GENDER_FEMALE-0.0716-0.38
FIRM_SIZE [=log (number employees+1)]
0.1963
4.55 **
FIRM_AGE-0.0056-1.03
RECEIVED_SUPPORT
0.21752.26 *
MANUFACTURE
WHOLESALE
0.1343
0.69
RETAIL-0.0438-0.27
FOOD-0.0584-0.28
CONSTRUCTION
0.00690.05
SERVICE
0.14221.04
ρ
-0.1370
Log likelihood-586.5Samle size
1995
* significant at 5%** significant at 1%

33

Table 5 Intention to Provide Start-up Support in the Future (Probit Model)
Dependent variable: have intention to provide start-up support in the future=1
Coef.
t-valueSig.
Constant
0.56772.84 **MANAGER_AGE-0.0117-2.86 **GENDER_FEMALE-0.1295-1.07
FIRM_SIZE [=log (number of employees+1)]
0.18295.43 **
FIRM_AGE-0.0063-1.72
RECEIVED_SUPPORT
0.4095
6.49 **
MANUFACTURE
WHOLESALE
0.31132.35 *RETAIL-0.0525-0.51
FOOD
0.1431
1.05
CONSTRUCTION
0.22672.20 *SERVICE0.1452
1.54
Log likelihood-1167.1
MacFadden R-squared
0.0504
Sample size
1922
The responses that they would actively like to provide support and they would consider
providing support if the conditions were right are taken as being have intention to provide startup support in the future.
* significant at 5%** significant at 1%

Table 6 Effect of Small Business Manager's Support on Supported Business
1. Supported Business's State of Operations(%)
Financial Non-financial
OverallSupportsupport only
Going well
40.5
40.7
40.4
Not going well
6.1
8.5
4.5
Already closing down or changing industry
3.4
5.1
2.2
Cannot be evaluated at the current time
44.6
39.0
48.3
5.4
6.8
4.5
Do not know
Total
100
100
100
Sample size
148
59
89
2. Effect of the Support on the Supported BusinessOverall
28.7
12.0
59.3
100
150

There was a positive effect
There was a negative effect
There was no real effectTotal
Sample size

34

Financial Non-financial
Supportsupport only
19.7
34.8
14.8
10.1
65.6
55.1
100
100
61
89

Table 7 Support by Small Business Managers and the Performance after Start-up （Probit Model）
Dependent variable: Current monthly business level exceeds pre start-up monthly business level target=1
Coef. t-value Sig. Coef. t-value Sig. Coef. t-value Sig.
Constant-0.1867 -0.76-0.1951 -0.78-0.1685 -0.68
ENTREPRENEUR_AGE-0.0112 -2.85 ** -0.0112 -2.85 ** -0.0111 -2.82 **GENDER_FEMALE-0.2418 -1.99 *-0.2421 -1.99 *-0.2450 -2.01 *STARTUP_CAPITAL [log (start-up capital）] 0.0965
2.54 *
0.0965
2.54 *
0.09542.51 *
FIRM_AGE (months since start-up)
0.01283.93 **
0.01283.93 **
0.01273.90 **
MANUFACTURE
WHOLESALE-0.0902 -0.49-0.0912 -0.49-0.0913 -0.49
RETAIL-0.2056 -1.20-0.2062 -1.20-0.2010 -1.17
FOOD-0.3625 -2.10 *-0.3620 -2.09 *-0.3632 -2.10 *CONSTRUCTION
0.01980.10
0.01900.10
0.0217
0.11
SERVICE-0.1044 -0.67-0.1043 -0.66-0.1021 -0.65
GENERAL_SUPPORT
0.01490.20
FINANCIAL_SUPPORT-0.0812 -0.95-803.5-803.5-803.1
Log likelihood
0.02740.02740.0279MacFadden R-squared
Sample size
1262
1262
1262
* significant at 5%** significant at 1%

35

Appendix
Intention to Provide Start-up Support in the future (Ordered Probit Model)
Dependent variable: have intention to provide start-up support in the future
Coef.
t-value Sig.
MANAGER_AGE-0.0107-3.03 **GENDER_FEMALE-0.1099-1.03
FIRM_SIZE [log (number of employees+1)]
0.14365.01 **
FIRM_AGE
0.0000-0.01
RECEIVED_SUPPORT
0.3485
6.37 **
WHOLESALE
0.24482.15 *RETAIL-0.0975-1.07
FOOD
0.1437
1.22
COSTRUCTION
0.1469
1.63
SERVICE0.1287
1.56
Estimated Limit Points
γ1-1.8944 -10.49 **γ2-0.5294-3.02 **
γ31.63969.14 **
Log likelihood-1741.84
Sample size
1922
* significant at 5%** significant at 1%
Distribution for the dependent variable
Value
0. Absolutely don't want to
1. Not interested in support
2. Would consider if conditions are good
3. Would actively like to
Total

No.
80
569
1184
89
1922

36

%
4.16
29.6
61.6
4.63
100

Figure 1 Start-up Support by Small Business Managers(multiple answers by 150 small business managers)
0

10

20

30

Capital investment (including lending that repayments
are not engaged)

Introduction of a financial institution

20

20

Loan of office, factory, and shop

11

Introduction of office, factory, and shop

12

Introduction of, and mediation with employees

1511

Introduction of suppliers and clients

43
28
51

Teaching of skills and technology

42

Teaching of marketing skills

30

Providing the necessary financial, legal, and technicalknowledge needed for management and to establish the32

Non-financial support only37

90 1001

Loan of equipment, plant, and machinery

Financial support

80

2
19

Establishing a business relationship and becoming a
supplier or client
Giving general advice about management and businessplanning

70

14

Guarantee for a loan from a financial institution

Dispatch of employees

60

3Loan of start-up capital (without interest)

Introduction of investors

50

32

Loan of start-up capital (with interest)

Collateral offer

40

61
89

Discussion Paper
No.
2002・1

AuthorNobuyuki Isagawa

2002・2

Nobuyuki Isagawa

2002・3Mahito Okura

2002・4

Elmer Sterken
Ichiro Tokutsu
Mahito Okura
Mahito Okura
Nobuyuki Isagawa
Koji Okubayashi
Toshinori Takashina

2002・5
2002・6
2002・7
2002・8

2002・9Hajime Shimizu

2002・10 Nobuyuki Isagawa
2002･11

Nobuyuki Isagawa

2002･12Kenji Kutsuna
Richard Smith

2002・13 Kunio Miyashita
2002・14 Hajime Shimizu
2002・15 Hajime Shimizu
2002・16 Koji Okubayashi
2002・17 Fumitoshi Mizutani
Shuji Uranishi
2002・18 Kazuhisa Otogawa
2002・19 Atsuo Takenaka
2002・20 Tsuneo Nakano

2002・21 Tsuneo Nakano
2002・22 Fumitoshi Mizutani
Shuji Uranishi
2002・23 Atsushi Takao
Mahito Okura
2002・24 Fumitoshi Mizutani
2002・25 Fumitoshi Mizutani
Takuya Urakami
2002・26 Yasuyuki Miyahara
2002・27 Nobuyuki Isagawa
2002・28 Mitsutoshi Hirano

Title
Cross Holding of Shares, Unwinding Cross Holding of
Shares, and Managerial
Entrenchment
A Theory of Stock Price Behavior following Repurchase
Announcements
An Equilibrium Analysis of the Insurance Market
with Vertical Differentiation
What are the determinants of the number of bankrelations of Japanese firms?
Review Article：Adverse Selection in Insurance Market
Welfare Effect of Firm Size in Insurance Market
Does Investment Horison Affect Investment Strategy ?
Research Report of Careers and Employment Process ofWorkers over 60 years old :a Case of a Japnaese
Manufacturing Company
On the Existence of Tax Equilibrium : Incomplete Market
with Capital Income Tax
Cost of Financial Distress and Debt Restructuring :Debt Forgiveness and Equity-for-Debt Swap
Open-Market Repurchase Announcements, Actual
Repurchases, and Stock Price Behavior in Inefficient
Markets―revised version of No.2001･36―
Why Does Book Building Drive Out Auction Methodsof IPO Issuance?
Evidence and Implications from Japan
International Logistics and Modal Choice
Incomplete markets with capital income tax and public
goods
On the possibility of Pareto improving of tax-equilibrium
China-Japan Comparison of Work Organization
The Post Office vs. Parcel Delivery Companies:
Competition Effects on Costs and Productivity―revised version of No.2001･33―
Earnings Forecast and Earnings Management of JapaneseInitial Public Offerings Firms
The Classification of Foreign R&D Units
The Dutch East India Company and its Corporate
Governance―revised version of No.2000･40―
The British East India Company and its Corporate
Governance
Privatization Effects on TFP Growth and Capital
Adjustments
Some Notes on the Privatization of Postal Life Insurancein JapanPrivately Owned Railways’ Cost Function, Organization
Size and Ownership
A Private-Public Comaprison of Bus Service Operators
Principal-Multiagent Relationships with Costly
Monitoring
Unwinding of Cross Shareholding under Managerial
Entrenchment
Contingency Model for Personnel Grading System―Issues on Design and Management for Qualification
System and Job Grading System―

Date(in Japanese)

1／ 2002(in Japanese)

1／ 20022／20023／2002(in Japanese)(in Japanese)(in Japnaese)

3／20023／20023／20024／2002(in Japnaese)

4／2002(in Japnaese)

4／20025／20025／2002(in Japnaese)(in Japnaese)

6／20026／20026／20027／20027／20028／2002(in Japanese)(in Japanese)

8／20028／2002(in Japanese)

8／20028／2002(in Japanese)

9／20029／20029／2002
10／2002
10／2002(in Japanese)

11／2002

Discussion Paper
No.
Author
2002・29 Atsushi Takao
2002・30 Yasuhiro Shimizu
2002・31 Hideki Murakami
2002・32 Atsushi Takao

2002・33 Nobuyuki Isagawa

2003・5

Takuji Hara
Katsuhiko Kokubu
Kazuhiro Tanaka
Fumitoshi Mizutani
Shuji Uranishi
Yang Jia Yin
Koji Okubayashi
Mitsutoshi Hirano

2003・6

Kazuhisa Otogawa

2003・7

Nobuyuki Isagawa
Tadayasu Yamashita
Kenji Kutsuna
Marc Cowling

2002・34
2003・1
2003・2
2003・3
2003・4

2003・8

2003・9

Noriko Masumura

2003・10 Nobuyuki Isagawa
Katsuhiko Okada
2003・11 Mitsutoshi Hirano
2003・12 Kenji Kutsuna
Richard Smith
2003・13 Kenji Kutsuna
Janet Kiholm Smith
Richard L. Smith
2003・14 Hideya Kubo
2003・15 Hideki Murakami
2003・16 Norio Kambayashi
2003・17 Nobuyuki Isagawa
2003・18 Nobuyuki Isagawa
2003・19 Huang Lin
2003・20 Koji Okubayashi
2003・21 Nobuyuki Isagawa

Title
On the Emergency Effect of the late FUKUZAWA,
Yukichi in Introducing of Modern Insurance into Japan
Amortization of Intangible Assets before Newark
Morning Ledger
An Economic Analysis of Duopolistic Competition
between Gulliver and Dwarf airlines:
The case of Japanese Domestic Air Markets
Simulation Model to Consider the Penetration of Modern
Insurance in Japan −Confirmation of Emergence andPhase Transition of New Japanese Risk-Bearing System
by Evolutional Economics
Mutual Shareholding and Unwinding of Mutual
Shareholding as Stockpile for Business Recovery
TLOs in Japan in the life science area : present and future
Environmental Accounting for Corporate Management
Embeddedness and Entrenchment of Managers
The Effects of Privatization on TFP Growth and Capital
Adjustments
Labour Turnover of Japan-Affiliated Companies inShanghai
Generation and Resolution of Asymmetric Information in
Human Resource Management –In the Cases of Job
Rotation in Two Retailers in JapanMarket Liquidity around Quarterly Earnings
Announcements
Lender’s Risk Incentive and Borrower’s Risk Incentive
Determinants of Small Business Loan Approval:
Evidence from Japanese Survey after 1997 Financial
CrisisVoluntary Corporate Disclosure and the Cost of Debt:
The Case of Quarterly Reporting
Corporate Financial Strategy and Stock Price Behavior
in a Noise Trader Model with Limited Arbitrage
Two Modes of Economic Organization in the Duality
Principle and Asymmetric Personal Information
Why Does Book Building Drive Out Auction Methods of
IPO Issuance? Evidence from Japan (Revised version)
Banking Relationships and Access to Equity CapitalMarkets:
Evidence from Japan’s Main Bank System
The Present Condition and Problem of JapaneseCorporate Pension Systems
An empirical analysis of the spillover and dynamic
effects of low-cost airline’s presence on rival’s price:
US duopoly case
Japanese Style of Management Education
Unwinding of Cross Shareholding for BusinessRestructuring
Unwinding of Cross Shareholding: A Signalling
Approach
Strategies and Store Development of Carregour in the
Chinese Continent
Emp lo yme nt Situation and Measur es for
In cr easing Emp lo yme nt Oppor tun ities;
Th e Cas e o f Jap an
L end er ’s Risk In cen tiv e and D eb t Forg iv ene ss(in Japanese)Date
11／2002(in Japanese)

11／2002
11／2002(in Japanese)

12／2002

12／2002(in Japanese)(in Japanese)(in Japanese)

12／2002
1／20032／20032／2003(in Japanese)

3／2003(in Japanese)

3／20033／2003(in Japanese)

3／20033／2003(in Japanese)

4／20034／2003(in Japanese)

5／20035／20035／2003(in Japanese)

6／2003(in Japanese)

7／2003(in Japanese)(in Japanese)

7／20037／2003(in Japanese)

7／2003(in Japanese)

8／20038／20038／2003

Discussion Paper
No.
Author
2003・22 Keizo Mizuno
Fumitoshi Mizutani
Noriyoshi Nakayama
2003・23 Kenji Kutsuna
Nobuyuki Harada

Title
Industrial Diversity and Metropolitan Unemployment
Rate

Date
9／2003

Small Business Managers as Latent Informal Investors inJapan:
Evidence from a country with a bank-based financial
system9／2003