Publication: Journal of Business Venturing
Angel investors' decisions are embedded in and influenced by the institutional environment. This paper advances a multilevel model on how social trust directly and indirectly impact individual’s angel investment decision. It is postulated that two dimensions of social trust, the level of trust and the radius of trust, can enhance information flow, collaboration, and sanctioning mechanisms in a society; as a result, they facilitate angel investment and moderate the relationship between individual factors and angel investment. Multilevel modeling on data from 92,235 individuals across 25 countries shows that individuals in countries with high level of trust are more likely to make angel investment. Moreover, both levels of trust and radius of trust are found to heighten the positive relationship between individual's perceived entrepreneurial skills and angel investment, but dampen that between seeing opportunity in new business and angel investment. These direct and moderating effects are robust even after wealth, cultural values, and other factors are controlled. This study contributes to the research interaction of entrepreneurship and social trust theory.