“Economic sustainability” and “entrepreneurial finance” are inter-related areas that have drawn considerable attention from the government and policy makers, practitioners and academics. The term “sustainability” refers to the long-term maintenance of systems based on economic, environmental, and social considerations (the so called ‘triple bottom line’). A narrow definition of economic sustainability focuses on the sustainable growth of the firms. This includes strategies which, for example, lead to a long-term rise in the share price, revenues and market share rather than short-term explosions of profits at the expense of long-term viability of success. A broader concept of economic sustainability would include the company’s attitude towards and impact upon the economic framework in which it is embedded. Frauds, bribery, or cartels, for instance, could be regarded as economically unsustainable because these activities undermine the long-term functioning of markets.
On the other hand, the role of finance in supporting the growth of the firms is well established. Other than providing financial support, the financiers’ funding decisions provide crucial feedback on innovations and direct a society’s entrepreneurial efforts. ‘Entrepreneurial finance’ is the study of value and resource allocation to new ventures who are propellants of innovation. In the narrow sense, it studies the role of specialized financiers (such as angel investors, venture capitalists, and private equity) in selecting and coaching entrepreneurial firms. In a broader sense, it also embraces financial innovations in association with information technology advancement. These financial innovations (such as new payment methods, P2P finance, crowdinvesting, etc.) combine the digital savvy and let’s-disrupt-something attitude of start-ups, the social mission of microfinance and financial inclusion, and insights from behavioral economics and human-centred design. Entrepreneurial finance creates new opportunities and threats for financial service providers, and promises radically different and better products tailored to individual needs and characterized by higher quality, lower cost, and unheard-of convenience.
Entrepreneurial finance and economic sustainability are closely connected. Only when an entrepreneurial firm is “sustainable” economically, socially and environmentally and in governance can it provide stable returns to its financiers. In the past decade, socially responsible investment (SRI), which represents an investment strategy that incorporates environmental, social, and governance (ESG) standards into consideration, has become the most vibrant area in the global investment industry. According to a Pricewaterhouse Coopers (PwC) report based on a survey of the world’s largest 17 private equity firms, 94% of their general partners agree that ESG are important indicators for firm vale, and they will enhance the proportion of SRI in their portfolios in the next five years.
The above new trends and connections all require scholarly understanding, and research output in economic sustainability and entrepreneurial finance will be of substantial interest to financial institutions, policy makers, regulators, and businesses. The School of Accounting and Finance (AF) at The Hong Kong Polytechnic University recognizes this opportunity and proposes to establish the Centre for Economic Sustainability and Entrepreneurial Finance (CESEF), which will act as a platform for pooling the school’s inter-disciplinary research strengths, as well as its strong partnership with the industry (details below), to generate strong research impact in the Greater China region.