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We extend theories of the firm to the entrepreneurial finance setting and argue that R&D-focused start-up firms will have a greater likelihood of financing themselves with equity rather than debt. We argue that mechanisms which reduce information asymmetry, including owner work experience and financier reputation, will increase the probability of funding with more debt. We also argue that start-ups that correctly align their financing mix to their R&D focus will perform better than firms that are misaligned. We study these ideas using a large nationally representative dataset on start-up firms in the United States.

The purpose of this paper is to explore the extent to which various theories of capital structure “fit” in the case of new technology‐based firms.

This study uses data from the Kauffman Firm Survey, a longitudinal data set of over 4,000 firms in the USA. Descriptive statistics and multivariate results are provided.

The authors' findings reveal that new technology‐based firms demonstrate different financing patterns than firms that are not technology‐based.

Although some support was found for both the Pecking Order and Life Cycle theories, the results also indicate that technology‐based entrepreneurs are both willing and able to raise substantial amounts of capital from external sources.

Technology‐based entrepreneurs need external sources of equity, in particular, in order to launch and grow their firms.

To the authors' knowledge, this is the first article to test specific theories of capital structure using a large sample of new technology‐based firms in the USA.

The growth of firms is fundamentally based on selfreinforcing feedback loops, one of the most important of which involves cash flow.When profit margin is positive, sales generate cash, which may then be reinvested to finance the operating cash cycle.We analyze simulations of a sustainable growth model of a generic new venture to assess the importance of taxes, and regulatory costs in determining growth.The results suggest that new ventures are particularly vulnerable to public policy effects, since their working capital resource levels are minimal, and they have few options to raise external funds necessary to fuel their initial operating cash cycles.Clearly, this has potential consequences in terms of gaining competitive advantage from experience effects, word of mouth, scale economies, etc. The results of this work suggest that system dynamics models may provide public policy-makers a cost-effective means to meet the spirit of the U.S. Regulatory Flexibility Act

The purpose of this paper is to examine the effect of immigrant and ethnic enclaves on the success of entrepreneurial ventures as measured by firm profits and viability.

Data on entrepreneurs and their new firms were provided by the Kauffman Foundation and covered the years 2004-2008. These firm-level data were linked to Census 2000 Summary Files at the ZIP Code level and were used to empirically investigate the effect of enclaves.

The paper found a statistically significant negative effect of immigrant representation in an area on firm profitability. This effect operated on native, rather than immigrant, firm owners, which suggested that native-owned firms locating in immigrant enclaves may experience difficulty assimilating the benefits that enclaves offer.

Cultural connections within local communities play a key role in the success of new businesses. Potential firms should recognize the importance of these connections when making firm location decisions. Likewise, the findings suggest that connections within local communities should be considered when designing aid programs.

The authors used a unique measure of enclave representation to incorporate both immigrant, as well as ethnic, representation in the local area. The authors examined the effect of immigration on both immigrant- and native-owned firms in order to provide a broader scope and a more complete understanding of the effects of immigration on entrepreneurial ventures.