Investors or Gamblers?

Investors or Gamblers?

WOJCIECH NASIEROWSKI

Professor Społeczna Akademia Nauk (SAN – Peoples Academy of Science), Łódź, POLAND and Faculty of Business Administration, University of New Brunswick CANADA

Abstract:* Selected aspects of various types of risky business investments (in start-up ventures, innova-tions, technological development) are explored in this paper. These types of investments / expenditures by their nature are risky; though offer a high pay-off. It has been found that business investments may be compared to gambling: both are governmental policy issues. It is shown that investment in high risk business ventures is positively related to pro-gambling tendencies, as well as with uncertainty avoidance, ease of doing business, and pro-entrepren-eurship attitudes. The exploration of this issue is expected to provide a starting point for dis-cussion about the governmental role in promoting innovation.

*Parts of this paper have been presented during the Decision Sciences Institute Conference, New York, November 2011.

Key Words: private investment, business angels, venture capital, gambling, innovation

I. INTRODUCTION

Whether for improvement of the economy, monetary, social, or environment benefits, putting innovations into actual use is of paramount importance. There is currently a great deal of research being done about innovative products and services, but without application of these ideas, they account for almost nothing. There are many players in a National Innovation Systems that contribute to the identification of new solutions (whether on the invention or innovation side), and unless they cooperate, no one wins. All the participants bring different assets to the table: governments – have legislative power; research institutions and universities – have knowledge, findings and people ready to work towards innovation; while businesses and entrepreneurs – have the ideas. However, these participants must have funds in order to act. This paper explores some patterns of funding of innovative / inventive activities. The following sources of funds are in place:

1. Seedmoney,orstart-upenterpriseinvestments(the so called private or informal “3Fs” investments);

2. Sustained growth capital in the form of venture capital;

3. Corporate / state funding of innovations (here confined to R&D).

Investments in innovations, or in more general terms, in start-up ventures and technological development, are costly and risky. Estimates indicate that only 1 out of 7 innovative projects bring commercial success. Some other sources claim that 12% of projects are the case (e.g., Cooper, 1993; Frese and Sauter, 2003). Similar results occur regarding successes of informal investments in innovation (e.g., Tamowicz, 2003, p.21; Mason, 2002; Sohl, 2003). Thus, one can ask the question: why should one invest in risky business ventures which would require some involvement and business knowledge, when there are other means to risk capital and win or lose. One can go, for example to a casino and play roulette or black-jack – there are chances to win high, even if these chances are low. In both cases – investments and gambling – there are country specific regulations and tax consequences. Also, there is an impact of attitudes of investors / gamblers – ease of doing business or gambling, entrepreneurial attitudes, propensity to accept risk, degree of greediness. Following such a line of reasoning one can formulate the following hypotheses:

H1: Indicators of perceptions of ease of doing busi- ness, entrepreneurial drive, and public and private support of technological development have a high positive correlation with investments in various forms of technological development

H2: Indicators of investments in innovations also have a high positive correlation with revenue from gambling activities.

Conclusions from exploration of these topics are expected to show some country specific solutions, and may be indicative of adequate forms of support for in- novations. The structure of spending for innovations, even if examined from the quantitative perspective, may shed light into Best Management Practices in fostering innovativeness. Moreover, public / private investment may serve as an indicator of commer- cialization propensity. It is particularly the case with informal business investments because businesses have a higher rate of success, since they know better what may have commercial value. Thus, examination of these issues is warranted.

In order to address research questions posed in this paper the following outline has been adopted. First, a literature overview of issues related to private investments, venture capital, R&D expenditures, and gambling will be presented. Questions related to meth- odology of investigation of the research questions and available data sets will then be explored. Following these presentations, analysis of statistical data series will be performed in an attempt to verify research hypotheses. The last section will conclude the paper and outline ideas for further studies.

II. AN OVERVIEW OF VARIOUS CROSS-SECTIONS OF RISKY INVESTMENTS

2.1. Private Investments

Private investment is a frequent and important source used to support risky ventures. Almost every new venture, from mom-and-pop convenience stores to Silicon Valley superstores such as Google, start with an investment from the founders themselves, eventually supported by their friends, family, or ‘business angels’

(‘3Fs’ – family, friends, fools)1. “These informal in- vestors are vital to the start-up process.” (Bosman and Levie, 2009, p.52) Such investments are also referred to as informal investment. Such informal investments are motivated by: greed, the personal satisfaction of being involved in business or in helping others, tax advantages, way of life (e.g., EBAN, 2008, pp.16-17; Szerb et.al, 2007, pp.258-263; Tamowicz, 2007, p.15).

Some features of private investments can be explained through references to ‘angel investors’ (‘business angels’): “…. are individuals who invest in businesses looking for a higher return (Blonski, 2009, p.17). A ‘business angel’ is usually, a former entrepre- neur or professional who provides starting or growth capital in promising ventures, and helps with advice and contacts. Unlike venture capitalists, angel inves- tors usually operate alone (or in very small groups) and play only an indirect role as advisors in the operations of the investee firm. They are deemed to be ‘angels’ in comparison with grasping investors who are termed ‘vulture capitalists (Business Directory, 2010). Tamo- wicz (2007, pp.17-18) has suggested classifying them into three categories: economic investors – who invest mainly for profit reasons and accept the most risky initiatives; hedonists – who in addition also expect higher returns, but also seek pleasure from doing busi- ness; and altruists – who also take into account social benefits of investments, yet this group is the smallest. Another overview of motives has been presented by Mason (2002, p.28), who claims that the prime motives deal with the potential to quickly earn high returns, get satisfaction from involvement in business, gain current and future income, yet also benefit from favorable tax regulations. The European Union income tax provides a 20% relief, up to €600,000, 40% on failed invest- ments for support given to innovations (Blonski. 2009, p.17). In Canada, Capital Gains Exemption for angel investors exists, along with a 30 % tax credit (Fletcher & Gitelman, 2005, p. 8). However, this practice leads to concerns about abuse due to a “70:30 risk shar- ing ratio between equity investors and government” (Fletcher and Gitelman, 2005, p.6-8). Most U.S. states offer 25%-50% tax credit, plus individual caps of US $2-8 million in some cases (Williams, 2008, p.4-5). According to Mason and Harrison (2002, pp.211-236) in 40% of cases such businesses experienced negative returns on their investments and in 10% of instances the return was higher than 100%.

1 Bygrave and Hunt (2004, GEM, p. 17) provide the following patterns of relationships of informal investor to investee: close family – 49.4%; other relatives – 9.4%; work colleague – 7.9%; friend, neighbour – 26.4%; stranger – 6.9%.

In Europe 75,000 ‘business angels’ have invested some €3 billion for start-ups, and 250 networks (Ebancongress, 2008, p.5). Sohl (2003, p.2-17) has estimated that there are some 300-350 thousand angel investors, who invest US $30 billion/year, in about 50 thousand initiatives. In the UK there were 20-40 thousand investors, with some £ 0.5-1.0 billion, in 3-6 thousand projects (Tamowicz, 2007, p.23; in Mason, 2006, p.11). Tamowicz (2007, p.23) has provided the following estimates regarding ‘business angels’: Germany – there are some 27 thousand active angel investors, with some 220 thousand potential investors; Finland – there are 1500 investors with US $330 million investment; The Netherlands – there is some US $1.65 billion investment; Europe – there are some 125 thousand ‘business angels’ who have some US $11-22 billion for investment. These numbers are underestimated, yet ‘business angels’ experience problems identifying projects worth supporting. The proportion of active ‘business angels’ compared to these who may become active is 1:5 (1:3 in the 90s, 1:8 according to the European Commission) (Tamowicz, 2007, p.23). It should be noted, however, that statistical data series regarding ‘business angels’ investments (and private investments in general), are fragmented, incomplete, and thus, quite unreliable. They cannot be supported by official statistical data (also because of the “grey zone phenomenon”), and for ‘business angels’ these data deal with estimates based on interviews with members of selected investors’ groups (e.g., EBAN, 2008, pp.4-5).

Moreover, it is widely recognized that there is a funding gap for early-stage technology development and that markets for allocating risk capital to such activities are not efficient. The term “Valley of Death” has been used to dramatize the particular challenges facing entrepreneurs engaged in the transition from invention to innovation (NIST, 2002). “Early stage companies often experience a situation where they are making profits, but have a negative cash flow because of the need to invest in equipment and personnel” (Karlsson, 2004, p.76).

The solution adopted by the U.S. government related to some up-front investment in innovative ventures is worth mentioning – it is a solution similar in terms of focus to that used by ‘business angels’. The Small Business Innovation Research (SBIR) program and the related Small Business Technology Transfer (SBTT) program have been pointed out as particularly interesting in terms of commercializing R&D. Through the program, a specific percentage of federal R&D funds are reserved for small businesses

(this may amount to $3B – assume 3% of publicly funded R&D). Federal agencies with external R&D obligations above 100 million dollars must set aside 2.5% for SBIR projects. Ten agencies participated in FY 1999. Each year, the departments and agencies required to participate, designate R&D topics and accept proposals. They are responsible for releasing solicitations, evaluating proposals and awarding SBIR funding agreements on a competitive basis. Proposals are typically evaluated along three dimensions.

• Agency importance – the ability to meet federal R&D needs,

• Commercial importance – the ability to transform R&D into commercially viable products and

• Technology leadership – the science and technology capacity of the applying firm (such as expertise, facilities and experience).

Innovations that have been patented or have patents pending are not considered under the program – the focus is entirely on new innovations (Karlsson, 2004, p.66).

Evaluations of these “R&D procurement” programs have been positive and they are considered to play an important role in the overall technology transfer effort. Another program is the Small Business Investment Companies (SBIC) that has been a significant source of venture capital in the U.S. (Karlsson, 2004, p.12). Sweden has had a number of national small business programs, administered mainly by the Swedish Business Development Agency – e.g., NUTEK, where companies can apply for regional investment subsidies (NUTEK, 2007, p.2). These subsidies are available to companies provided they meet general requirement and are intended to facilitate the company’s needs for tangible and intangible assets such as machinery and/or patents.

The U.S. has a strong entrepreneurial culture. Stud- ies show that the U.S. ranks high when it comes to start-up experience and the number of people working in newly formed companies. It is often pointed out that Americans are more willing to take risks compared to people in other countries and that it is easier to start over again after a business failure. However, it is important to note that this culture has developed in the context of, among other things, facilitating tax and bankruptcy reforms and of a system of well-developed entrepreneurial education at universities and colleges.

2.2. Venture capital

All start-ups get financing from founders and informal investors (or ‘business angels’). Those that are successful seek venture capital support if needed. Venture Capital is a source of support for innova- tions done in a somewhat formalized manner: it is a capital invested in an asset, security or venture in which there is an element of risk, with the possibility of extraordinary gains (or losses). Venture Capital2 is a fund-raising technique for start-up firms and small businesses with exceptional growth potential who are willing to exchange equity in the company in return for money to grow or expand the business (Investors Words, 2010). DataMerge, a financial information provider, says that VC investments in an enterprise are usually between US $500,000 and $5 million, and that the investor is likely to expect an annual return of 20% to 50%. Managerial and technical expertise is often provided as well. A venture capitalist differs from an angel investor in terms of wanting greater control in the company and a quicker return on their investment (About.com, 2010).

In recent years, around US $25 billion of joint venture capital, or approximately .2% of GDP, has been invested annually in U.S. companies (by the early nineties it was approximately .06% of GDP). About £7 billion was invested in European companies (approximately 0.05% of Europe’s GDP). For some details regarding this form of support please refer to Table 1. Whereas it may be reasonably assumed that ‘informal investment’ may have mainly ‘entrepre- neurial drive’, venture capital is invested for profit reasons, and is associated with a slightly lower risk, and arranged normally within a tight legal context. It should be noted that, venture investment is associated with quite rigorous scrutiny. In the U.S., “in the last 40 years, no more than about 30.000, or about one in one thousand, have ever received venture capital. Looked at another way, only 1,170 U.S. companies received their first round of venture capital in 2008, and of those only 330 were seed or start-up stage companies. In all of Europe, 549 seed stage companies received venture capital in 2008” (Bosma and Levie, 2009, p.55). In Sweden, venture capital is primarily provided by large institutions. A variety of government support systems has been established to compensate for the lack of private capital. For example, the Technology Link Foundation was established in the mid-90s to provide early-stage funding that supplemented private investments. The Swedish government coordinates funding for R&D through several agencies including NUTEK, VINNOVA and STEM for example. These agencies receive their funding from various govern- ment ministries. In the US, the Small Business Invest- ment Company program has been pointed out as an interesting example of leveraging private investments with government funding (Karlsson, 2004, p.83).

2 Venture capital was once known also as risk capital, but that term has fallen out of usage, probably because investors don’t like to see the words “risk” and “capital” in close conjunction. Venture capitalists often don’t tend to think that their investments involve an element of risk, but are assured a successful return by virtue of the investor’s knowledge and business sense.

The U.S. venture capital market is the largest and most developed in the world and has played a crucial role in the formation of new high-technology companies. According to Karlsson (2004, p.53), over 80 percent of the entire world’s venture capital is invested in the US. ‘Angel investors’ provide the most significant source of funding for individual technology entrepreneurs and small technology start-ups while venture capitalists prefer to support firms that have at least proceeded beyond the product development stage. Generally, amounts of money invested, though substantial, differ substantially between sources. For example, in 1999, private investments by individuals were estimated to be more than US $63 billion compared to 49 billion dollars invested by venture capitalists (Karlsson, 2004, p.52). Price Waterhouse Coopers Money Tree Report (PW) (Thompson, 2008, p.2) indicated that combined investment by venture capitalists and angel investors accounted for $30.7 billion in 2007. However, there has been a historical downward trend since 2000. Comparing first quarter 2000 venture investment in business of US $28.4 billion with first quarter 2008 of US $7.4 billion less than a decade later, there has roughly been a 75% decrease in venture investment in the U.S. The decrease may be related to the collapse of the dot.com industry, which was one of the main recipients of such investment. Following estimates by Karlsson (2004, p.10), venture investment was US $94 billion in 2000, then “radically” dropped to 19 billion in 2002, as focus has turned to less risky, later stage investments. The difference in estimates of venture capital investments may result from a different sample included in Price Waterhouse Report from the Karlsson sample, as well as from a departure from on-line type business support.

All in all, in the U.S. the regulatory environment has promoted the growth of investments in high- tech companies by ‘business angels’ and venture capitalists to an extent unmatched by any other county. A combination of tax reforms, banking and bankruptcy laws and pension fund regulations have facilitated private capital accumulation and increased the willingness to invest in high-risk enterprises (Karlsson, 2004, p. 83).

Direct quotes regarding venture capital investment that may be related to innovation is not available. Thus, one can assess this source of funding indirectly – for example, using WCY (2011, table 3.3.17); opinions as to whether public and private ventures are supporting technological development (from ‘are not supporting technological development’ to ‘are supporting technological development’ (WCY, 2011, table 4.2.17).

2.3. Corporate funding of R&D

Corporate and state investment in R&D can be regarded as indicators of the tendency to invest in risky ventures. Quotes related to direct investments in innovations are not available. However, both state and business R&D expenditures may be used as a proxy of expenditures in risky projects. European countries intend to increase levels of direct funding with the goal to reach the Lisbon Strategy goals of 3% of GDP. There are also national programs through which the countries are funding new ventures, innovations, and technology development. The nature and scope of these programs vary from one country to another. One can account indirect funding, through improving businesses’ access to information, education, infrastructure, as well as access to tax incentives for supporting innovation, yet systematic statistics regarding such issues has not been identified.

2.4. Gambling

There are no broadly accepted definitions of gambling – yet, it is “playing games of chance for stakes”. Data provided in the report are restricted to the following gambling activities: “casinos, gambling machines, lotteries, charitable betting (Bingo, etc.), other betting (including horse racing)” (MGF, 2010) (e.g., horse betting, dogs racing, chicken- fights, dog- fights, sports-betting are not included). Gambling (or betting) is any behavior involving the risk of money or valuables on the outcome of a game, contest, or other event in which the outcome of that activity is partially or totally dependent upon chance – it is an act or undertaking of uncertain outcome (The free …, 2010). Gambling can refer to casino gambling, fixed- odds-gambling, non-casino gambling games, gambling on horse races, sports betting, e-gambling. Gambling may also refer to engaging in any high-risk behavior in which decisions are made based upon incomplete knowledge, e.g., high-risk stock investments, difficult and potentially costly ventures, or even personal relationships (WorldIQ, 2010).

In Poland, some U.S. $5B was spent on gambling in 2009 (a 70% increase over 2008) (Ile Polacy, 2009). This translates to some US $131 per capita/ year, as compared to US $16 per capita/year spent on business R&D. “In Canada gambling continues to expand. In 2002, an estimated 18.9 million adult Canadians wagered Cdn $11.3 billion on everything from VLTs, lottery tickets and bingos to blackjack and slot machines in casinos. This amount was more than a four-fold increase from Cdn $2.7 billion a decade earlier … About 62% of problem gamblers spent more than US $1,000 a year in gambling, compared with only 4% of people who gambled with no problem” (CanGam, 2009)3. According to American Gaming Association “gross gambling revenue (GGR) is the amount wagered minus the winnings returned to players, a true measure of the economic value of gambling. GGR is the figure used to determine what a casino, racetrack, lottery or other gaming operation earns before taxes, salaries and other expenses are paid” which amounted to US $92.3 billion in 2007 (America Gaming, 2009).

In Bulgaria, taxes paid by “gambling” related companies are higher by some 20% than those by banks in Bulgaria in 2009. Gambling will bring some €51 million whereas banks will earn only €40 million. The decline in budgetary income from gambling decreased as compared to 2008 €57 million) which is attributed to the move to the e-gambling mode, and not as a result of the economic crisis (W Bulgarii, 2010).

The Ukrainian Parliament has started to crack down on gambling. The incident of a fire in one of the sa- loons where 9 people were killed was used as a pretext to demolish some 200 000 gambling machines. The U.K. and Spain seem to be the most liberal in Europe regarding regulations in the gambling sector. In the U.K. ‘one-hand-bandits’ and e-gambling are allowed anywhere subject to getting a license, which is not a complex process. In June 2009, Putin’s decree banned gambling, whereas Berlusconi opened the market for gamblers in Italy. The procedures to open a casino in Italy are much more relaxed compared to those in the US (Rożek, 2009). E-gambling in Poland is il- legal – however, it is not complex to open a gambling establishment in a country where e-gambling is al- lowed. It should be noted that e-gambling is booming: a 10% increase in Europe, with revenues of US $16.3 billion, which makes 4.7% of the gambling sector income. It is expected that the e-gambling sector will increase income to US $24,4 billion by 2012 (Bojka o… , 2010). Despite the on-line gambling ban in the U.S., gambling revenue is estimated to rise around the world, reaching US $144 billion 2011. Gambling rev- enue is growing 7.2% every year, according to Price- Waterhouse Cooper LLP report. In 2006, gambling revenue was US $101.6 billion, due to new casinos and upgraded existing casinos around the world. Current US revenue, which stands at about US $57.5 billion will grow an estimated 6.7 percent per year and reach US $79.6 billion. The gambling Markets of Europe, the Middle East and Africa will grow 1.9 percent each year, from US $25.2 billion to US $27.8 billion accord- ing to the forecast. The Asian market is growing even more rapidly and will grow 15.7% every year which will transform the current US $14.6 billion market to US $30.3 billion. This will make it the second-largest gambling market in the world (Hopkins, 2007).

3 Canadian Manitoba Gaming Research Program supports projects (some Cdn $1 million for individual scholars research only!) for that may prevent negative consequences of gaming in such areas as: responsible gaming strategies, gambling continuum and behaviors, understanding problem gambling risk and program responses, emerging technologies and responsible gaming

III. METHODOLOGICAL CONSTRAINTS OF THE REPORT

The paper can be regarded as a concise litera- ture overview on private business investment and gambling, with the main objective being to identify similarities and differences between business and gambling in terms of expenditures and legal concerns. Yet, the core is related to the examination of statisti- cal interrelationships, and hence, data used pose the biggest concerns.

There is a problem in making a distinction between invention (FM, 2002) and innovation (OM, 1999; Nasierowski, 2008). For the purpose of further argu- ment, and keeping in mind that these notions are not clearly distinguished when ‘money’ is concerned, these terms will be used as synonyms, although this could be considered somewhat incorrect. However, within the constraints of this study it is accepted. This is an initial study into the structure of funding innovations and its implications.

Data for venture capital were taken from Bosman and Jonathan (GEM, 2009, pp.53 & 56)4 and recal-culated to per/capita values. Data for gambling were taken from MGF (2010) and recalculated to per/capita values – since two cross-sections were provided, the average is used. Data for perceptions of investment climate are based on WCY (2011).

4 There was a strong temptation to include data about private investment into any examination of research hypotheses. However, data on family / friends investments are not available. There are some statistics on ‘business angels’ investments – e.g., provided by EBAN (European Business Angels Network), GEM (Global Entrepreneurship Monitor). These data series are very inconsistent. Some are based on sources from private institutions and subscription to these sources exceeds the financial constraints of this study. Some record capital invested while others record capital available. The use of surveys does not guarantee that the key portion of investment has been captured. Even if they deal with the same item the difference between sources is quite big. 

Data about private investments and gambling are not reliable and are easily available. Data-series on these activities come mainly from private sources and are costly to obtain. Therefore, references to these sources, used in other publications are used. There is, however, no access to information about methods for data collection, nor, for example, can it be identified whether values are given in nominal dollar values or are recalculated to PPP values. The identification of the year the data was collected is also troublesome. This issue is even more questionable because there are substantial changes of levels of investment from one year to another, as in the case of “angels” investments in the U.S. (Mason, 2006). The leading source about gambling expenditures, for example, provides infor- mation about gambling revenues in Russia, whereas, as of June 2009, gambling is illegal in Russia. The same source does not provide data about the situation in Bulgaria where gambling is almost an industry gen- erating income higher than that of the banks. In the case of gambling, the reality of expenditures is strongly affected by country specific regulations, thus prevent- ing any examination of the propensity of citizens to gamble. E-gambling, along with illegal and private gambling is gaining popularity, and remains a sort of a ‘grey-zone’. Data are further deflated by the fact, that many gamblers are not the citizens from the given country, but visitors. In the case when e-gambling is forbidden in a given country, the establishments can be registered in another country, where it is legal.

Under the circumstances, data used must be re- garded as general estimates. They do not provide a very valid reference, and hence the results arrived at must be treated with caution. The approach presented in this paper can be regarded as an outline for further studies, to be carried out with expectation of more precision, when data needed for such a study become reliable and more easily available for research purposes.

Table 1 Data used to verify research hypotheses

 Investors_or_Gamblers_table1_1 Investors_or_Gamblers_table1_2

Explanations: column: A – PPP (Purchasing Power Parity) (in $US); WCY, 2011, Table 1.1.21); B – R&D expenditures per capita (in $US (WCY, 2011, Table 4.3.03); C – public and private ventures support to technological development (index) (WCY, 2011, Table 4.2.17); D – entrepreneurship (is widespread in business) (index) (WCY, 2011, Table 3.4.07); E – ease of doing business (index) (WCY, 2011,Table 2.4.13); F – availability of venture capital (index) (WCY, 2010, Table 3.3.18); G – amount of informal capital per capita (in $ US) (based on GEM, 2009, Figure 39); H – venture capital investments per capita (in $ US) (based on GEM, 2009, Figure 42); I – gambling expenditures per capita (in $ US) (based on MGF, 2010, Table 4 & 5); J – uncertainty avoidance (index) (Hofstede, 1984).

As it was expected (hypothesis 1) in countries where it is considered that “it is easy to do business” there is a higher level of entrepreneurship (PCC= 0.499, p<0.001), funds from public / private sources to support technological development is available (PCC=0.724, p<0.001), and there are more VC funds available and invested (PCC=0.738, p<0.001). As well, in such countries expenditures are higher on R&D (PCC=0.488, p<0.001). Perceptions of higher levels of entrepreneurship are closely associated with the availability of funds for technological develop- ment (PCC= 0.534, p<0.001). More VC capital is invested in countries where there were private / pub- lic ventures support of technological development (PCC=0.380, p<0.001). Opinions that private / public funds are available for technological development (PCC=0.518, p<0.001), that it is easy to do business there (PCC=0.675, p<0.001), and VC is available (PCC=0.595, p<0.001) are characteristic of countries with a low uncertainty index.

For hypothesis 2 – gambling expenditures / rev- enues are closely linked to perception of ease of doing business (PCC=0.475, p<0.001). Countries where it is easy to do business (PCC=0.518, p<0.001), and ven- ture capital is available (PCC=0.675, p<0.001) show low levels of uncertainty avoidance5. Characteristi- cally, the higher the expenditures are for gambling (PCC=0.466, p<0.ww01), the lower is uncertainty avoidance.

V. OBSERVATIONS

Current results, keeping in mind the level of reli- ability of available data, do not render it possible to draw definite conclusions regarding interrelationships between conditions of doing business, a selected characteristic of national culture, ‘risky’ investments and gambling. Indeed, for as long as access to reliable data is available, systematic study on private invest- ment in innovations and gambling will be fraught with difficulties. Statistical sources on the number of ventures, amount of money invested, or gains are not available, and are very fragmented: these are only very broad indicators that do not facilitate drawing firm conclusions. Indeed, ‘business angels’ exist and help start up ventures, even though it seems to be a very minor chunk of investment in innovations. Ven- ture capital investment requires a more formalized format than that of ‘business angels’, and occurs more frequently involving higher amounts of capital. To this end, statistics indicate a pattern – availability of venture capital is positively correlated with the entre- preneurship drive of a society and income per capita. Innovations benefit businesses and the society. Thus, it is worth further exploration to learn how to enhance investors’ / gamblers’ participation in and contribution to our well being. Characteristically, these items may be linked to the propensity of the society to gamble: high level of risk with a potential for a high pay-off.

5 Uncertainty avoidance is the extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid these situations by providing greater career stability, establishing more formal rules, not tolerating deviant ideas and behaviors, and believing in absolute truths and the attainment of expertise (adopted from G. Hofstede, 1984).

The systematic sources of information for funding innovative ventures have not been identified. Sources regarding private financing are fragmented to some countries only, and methods for collection of report- ing these data have not been verified. It was expected that this study would identify, in a quantitative format, some patterns related to different forms of financial support of risky ventures. Also, the outcomes of this report had been expected to shed light on results of commercialization outcomes and investment in inno- vation upon contribution to financial/social benefits. However, with data-related methodological difficulties these objectives could not be achieved at this stage of the study

For example:

• although the amount of money spent for gam- bling in Poland, Canada, and the U.S. is similar as percentage of income, in Poland 8 times less is spent for business R&D, than for gambling;

• in the U.S. spending for R&D is only 10 times higher than for gambling.

• on average, people spend about the same amount of money for R&D (investment for future benefits) as for alcohol; almost the same amount as for gambling, restaurants, entertain- ment drugs and movies (MGF, 2010, table 1).

Such an observation suggests that, in some coun- tries, some rearrangements may here is something strange in terms of o promoting innovation. Instead of advocating current unproductive gaming, and probably excessive, entertainment, some concern should be paid to economic progress.

Private and business investments in innovation are generally higher in richer countries, as is the ease of doing business and the entrepreneurial drive. As well, venture capital is more readily available in richercountries. This suggests that wealth may stimulate more drive for further achievements.

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WOJCIECH NASIEROWSKI Społeczna Akademia Nauk (SAN – Peoples Academy of Science), Łódź, Poland, ul. Sienkiewicza 9, 90-113 Łódź, Poland and Faculty of Business Administration, University of New Brunswick Fredericton, NB, E3B 5A3 Canada, e-mail nasierow@unb.ca

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