A Finance Perspective on Entrepreneurship Research‪.‬

Much of the research in entrepreneurship to date involves the application of theory and methods from "established" disciplines--in particular psychology, management, and marketing--to issues faced by the entrepreneur. Despite the general recognition of the importance of finance in the development of entrepreneurial companies, there have been only limited attempts to apply finance theory and methodology to the issues that have arisen in this field. The purpose of this paper is to indicate opportunities for useful applications of finance theory and methodology in the developing field of entrepreneurship research. Since the 1950s, much has been learned about financial markets, their institutions, processes, and practices. Under the heading "modern finance," scholars have developed, through observation and analysis, a set of beliefs ("finance theory") that constitutes a framework for understanding the financial aspects of economic activity. Reference to this body of theory, which addresses such topics as net present value, market efficiency, portfolio management, capital asset pricing, option pricing, and agency costs, sharpens the ability of entrepreneurs, managers, and investors to estimate how their actions might affect future cash flows, risk levels, and the creation of corporate value and personal wealth in entrepreneurial ventures.