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Article
Publication date: 19 October 2023

Lingyun Huang, Jiankun Liu and Zhigang Huang

The operational framework of external financing in the correlation between the gender of entrepreneurs and firm performance remains to be resolved. This study aims to investigate…

Abstract

Purpose

The operational framework of external financing in the correlation between the gender of entrepreneurs and firm performance remains to be resolved. This study aims to investigate the mediating effect of external financing on gender-based disparities in private firm performance and to explore its heterogeneity within the Chinese context.

Design/methodology/approach

Based on national data from the 10th to 13th Chinese Private Enterprise Survey, this study used a bootstrap-based mediation effect model to analyze the role of external financing as a mediator in the relationship between entrepreneur gender and firm performance.

Findings

This study found that external financing is a constructive mediator between entrepreneur gender and firm performance. Heterogeneity analysis revealed that external financing plays a complementary mediation role in the impact of entrepreneur gender on performance in West China. In the tertiary industry, external financing acts as the sole mediator for the impact of gender on firm performance. Notably, this mediating effect is present in non-startups but not in startups.

Practical implications

The findings suggest that external financing can improve the firm performance of female entrepreneurs. Governments and policymakers should strengthen financial support for female entrepreneurs in West China, tertiary industry and non-startup enterprises.

Originality/value

This paper contributes to the literature on gender and corporate governance by shedding light on the mediating role of external financing in the relationship between the gender of business owners and firm performance.

Details

Gender in Management: An International Journal , vol. 39 no. 3
Type: Research Article
ISSN: 1754-2413

Keywords

Article
Publication date: 29 June 2021

Shivalik Singh and Bala Subrahmanya Mungila Hillemane

The purpose of this paper is to ascertain the factors determining the choice of sources of finance for a tech startup over its lifecycle.

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Abstract

Purpose

The purpose of this paper is to ascertain the factors determining the choice of sources of finance for a tech startup over its lifecycle.

Design/methodology/approach

This study adopts simple random sampling technique to choose 93 sample tech startups in Bangalore. Further, this study employs the primary data collection from the sampled startups under study through a semi-structured questionnaire and in-depth interviews with the founders/CEOs of these startups. Furthermore, it carries out binary logistic regression analysis to primarily examine the likelihood of a tech startup to approach and access a particular source of finance over its lifecycle.

Findings

Our results indicate that a tech startup's choice for a financial source varies with its lifecycle stage and financial requirements. We find that while in its early stage, a tech startup's choice of a financial source is limited to business angels (BA), in the growth stage, it approaches the institutional sources, viz. Venture Capital (VC), Corporate Venture Capital (CVC), Banks and Private Equity (PE) firms alternatively. Out of the three major categories of financial requirements: Human Capital (HC), Research Capital (RC) and Social Capital (SC), the requirement for HC and SC is predominantly funded by VCs, while the acquisition of RC is facilitated by early stage investors (BAs) as well as growth stage investors (CVC and PEs).

Research limitations/implications

The research implication of the study lies in bringing out the need to understand both the nature and the quantum of financial requirements of tech startups would influence the sources of finance it would approach and obtain finance for its operations and growth.

Practical implications

The major policy implication of the study refers to the need to promote the diverse sources of finance to meet the diverse needs of finance in different stages of a tech startup's lifecycle. Particularly in an emerging economy, where we do not see the emergence and growth of highly innovative tech startups, the need to promote adequate availability of RC is especially important.

Originality/value

This study makes a key contribution to the entrepreneurial finance literature by empirically investigating the factors determining a tech startup's propensity to approach and access a particular source of finance over its lifecycle.

Details

International Journal of Emerging Markets, vol. 18 no. 8
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 7 September 2023

Shaun Shuxun Wang

This paper provides a structural model to value startup companies and determine the optimal level of research and development (R&D) spending by these companies.

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Abstract

Purpose

This paper provides a structural model to value startup companies and determine the optimal level of research and development (R&D) spending by these companies.

Design/methodology/approach

This paper describes a new variant of float-the-money options, which can act as a financial instrument for financing R&D expenses for a specific time horizon or development stage, allowing the investor to share in the startup's value appreciation over that duration. Another innovation of this paper is that it develops a structural model for evaluating optimal level of R&D spending over a given time horizon. The paper deploys the Gompertz-Cox model for the R&D project outcomes, which facilitates investigation of how increased level of R&D input can enhance the company's value growth.

Findings

The author first introduces a time-varying drift term into standard Black-Scholes model to account for the varying growth rates of the startup at different stages, and the author interprets venture capital's investment in the startup as a “float-the-money” option. The author then incorporates the probabilities of startup failures at multiple stages into their financial valuation. The author gets a closed-form pricing formula for the contingent option of value appreciation. Finally, the author utilizes Cox proportional hazards model to analyze the optimal level of R&D input that maximizes the return on investment.

Research limitations/implications

The integrated contingent claims model links the change in the financial valuation of startups with the incremental R&D spending. The Gompertz-Cox contingency model for R&D success rate is used to quantify the optimal level of R&D input. This model assumption may be simplistic, but nevertheless illustrative.

Practical implications

Once supplemented with actual transaction data, the model can serve as a reference benchmark valuation of new project deals and previously invested projects seeking exit.

Social implications

The integrated structural model can potentially have much wider applications beyond valuation of startup companies. For instance, in valuing a company's risk management, the level of R&D spending in the model can be replaced by the company's budget for risk management. As another promising application, in evaluating a country's economic growth rate in the face of rising climate risks, the level of R&D spending in this paper can be replaced by a country's investment in addressing climate risks.

Originality/value

This paper is the first to develop an integrated valuation model for startups by combining the real-world R&D project contingencies with risk-neutral valuation of the potential payoffs.

Details

China Finance Review International, vol. 14 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 12 April 2023

Lalit Sharma

The purpose of the study is to review and understand firm selection mechanism involved in government venture capital (GVC) funding and identify key factors influencing selection…

Abstract

Purpose

The purpose of the study is to review and understand firm selection mechanism involved in government venture capital (GVC) funding and identify key factors influencing selection of tech-based firms for GVC funding.

Design/methodology/approach

This paper is based on real-time methodology. The data was generated from interviews of 60 young applicants, who applied for startup funding, and analyzed using statistical techniques to draw the results.

Findings

This review identifies financial viability, market viability and technological innovation to have the strongest predictive ability in firm selection process of the GVC funding program for tech-based youth-owned startups in the first round of interview. This review also highlighted that social impact is not a statistically significant variable in firm selection process in GVC funding.

Originality/value

This study tests the validity of the theory of GVC based on quantitative analysis of field data and identifies key factors with strong predictive abilities for GVC funding, more particularly for the youth-owned tech-based startups. This study brings to light the mechanism adopted for GVC funding and addresses gaps in the literature relevant to firm selection mechanism in GVC programs. This study would help GVC Fund Managers to review their own GVC programs in terms of selection mechanism and help them in appropriate designing of such programs.

Details

Journal of Research in Marketing and Entrepreneurship, vol. 26 no. 1
Type: Research Article
ISSN: 1471-5201

Keywords

Article
Publication date: 23 October 2023

Andreas Kuckertz and Alexander Brem

All over the world, countries are searching for ways to foster innovation and growth through startups. This viewpoint paper presents the aims, development procedure and contents…

Abstract

Purpose

All over the world, countries are searching for ways to foster innovation and growth through startups. This viewpoint paper presents the aims, development procedure and contents of Germany's “Startup Strategy,” published for the first time in 2022, along with a fundamental assessment of its potential usefulness.

Design/methodology/approach

In this opinionated viewpoint paper, the authors provide an overview of the strategy's contents and discuss it against established policy frameworks focusing on the determinants of innovative entrepreneurial activity and the potential consequences of the strategy on the micro-, meso- and macro levels of the German economy. Additionally, the authors evaluate and analyze the strategy's proposed fields of action to illustrate its potential impact on innovative entrepreneurial activity.

Findings

The strategy's development avoids considering an evidence-based, fundamental framework to structure its fields of action and instead relies on diverse input from various entrepreneurial agents. As a result, it emphasizes access to finance for startups and building entrepreneurial capabilities as its main fields of action. On the one hand, the authors show how the contents of the German “Startup Strategy” can be matched with the OECD (2017) framework. On the other hand, the authors offer detailed insights into how the “Startup Strategy's” fields of action might influence the German economy's micro, meso and macro levels.

Research limitations/implications

To the best of the authors' knowledge, this article is the first one commenting on the German government's first-ever published startup strategy. Hence, this might offer several starting points for other researchers to analyze future startup strategies. Also, comparing such strategic approaches in other European countries and beyond might be a starting point for developing public policies in this field. Also, researchers on entrepreneurial ecosystems and innovation ecosystems will find concrete anchor points for these subject areas.

Practical implications

Policymakers can use this viewpoint paper to devise future actions. The paper provides concrete fields of action on the individual and company levels, as well as on a national economic and regional ecosystem level, to derive such recommendations.

Originality/value

Germany is one of the strongest economic nations in the world and by far in Europe. Hence, this startup strategy comes with the potential for substantial impact. This viewpoint paper may inspire the development of other national strategies to create a positive economic and societal environment supporting the emergence of more innovative startups. In particular, the strategy's focus on diversity and social entrepreneurship seems promising.

Details

Journal of Entrepreneurship and Public Policy, vol. 12 no. 3/4
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 29 June 2023

Samer Abaddi and Moh'd Anwer AL-Shboul

Digital entrepreneurship is the key to economic survival and the lantern of jobs in developing countries. The debate about the challenges facing early digital entrepreneurs (DEs…

Abstract

Purpose

Digital entrepreneurship is the key to economic survival and the lantern of jobs in developing countries. The debate about the challenges facing early digital entrepreneurs (DEs) in developing countries is still ambiguous. This study attempts to fulfill the gap with an in-depth examination of Jordan.

Design/methodology/approach

Referring to a digital start-up database hosted by the Ministry of Digital Economy and Entrepreneurship in Jordan, the study interviews a random sample of (n = 45) early (less than one-year seniority) DEs. Thematic analysis is carried out facilitated by NVivo 20 software. E-Commerce, agriculture technology, data and artificial intelligence and entertainment were at the top of the interviewed start-ups.

Findings

Nine challenges were observed, critically analyzed and discussed. The challenges are (1) the lack of realistic funding in terms and guarantees; (2) the negligence of guidance and advisory of incubators and entrepreneurship centres; (3) the emergence of unexpected risks; (4) the stringent economic situation; (5) competition; (6) legal and legislative obstacles; (7) obstacles to accessing markets; (8) team management and finally (9) disorganization in the entrepreneurial environment. The study sets recommendations to support early DEs in their journey.

Practical implications

This study highlights the significant implications for aspiring DEs by focusing on some challenges that might face their start-ups such as institutional, technology and local dimensions of context and measures to develop the entrepreneurial and digital competencies. This includes sustainable funding, poor direct guidance and advisory, unexpected failures/risks, and economic obstacles. This study might be considered a road map for the decision-makers to build their strategies for eliminating the main barriers for early DEs and start-ups.

Originality/value

Although recent literature discussed the challenges of entrepreneurs in Jordan, this is the first that identifies early DEs’ challenges and uses 45% samples of the community.

Details

Management & Sustainability: An Arab Review, vol. 3 no. 1
Type: Research Article
ISSN: 2752-9819

Keywords

Article
Publication date: 1 June 2023

Kuldeep Singh

This paper examine whether social performance moderates the linkage between financial risk and financial performance in microfinance institutions (MFIs). The study focuses on the…

Abstract

Purpose

This paper examine whether social performance moderates the linkage between financial risk and financial performance in microfinance institutions (MFIs). The study focuses on the financial self-sufficiency and long-term sustainability of MFIs.

Design/methodology/approach

The empirical study uses unbalanced panel data of 2,694 worldwide MFIs from 2009 to 2019. In the first step, the study inspects the impact of social performance and risk on financial performance, proxied as return on assets and operational self-sufficiency. In the second stage, moderated hierarchical regression is applied to test whether social performance moderates the relationship between risk and financial performance. Lastly, the study confirms the significant moderation effects with slope tests.

Findings

The study detects robust evidence that financial risk is negatively related to financial performance. Though social performance exhibits a weak positive link with financial performance in silos, the evidence of its moderating effects on risk is mixed and significant. Social performance indicators, such as the borrower retention rate and female representation, positively moderate the relationship between financial risk and financial performance. The study documents that social performance impacts financial performance and operational self-sufficiency through risk moderation. Thus, social performance fosters the sustainability of these institutions over the long haul.

Research limitations/implications

The study is relevant to academics and theorists to consider the stakeholder approach in microfinancing. In the context of stakeholder theory, the study advances the specific social responsiveness process, namely stakeholder engagement.

Practical implications

The evidence that socially sensitive operations can curtail the adverse effects of credit risks on financial performance signify the required attention to social performance. For MFI managers and practitioners, the findings justify the business case for social performance. Stakeholder engagement, under the auspices of social responsiveness, acts as a risk-mitigation mechanism to eventually foster financial performance and self-sufficiency.

Social implications

The study motivates MFIs to do more for their stakeholders and society by highlighting the benefits of social performance.

Originality/value

The study reaffirms that social performance remains at the epicenter of the MFIs' mission and is an essential risk mitigation mechanism. The study adds to the extant literature on stakeholder engagement and its effects on MFIs.

Details

International Journal of Bank Marketing, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 5 July 2021

Muhammad Ahad and Zulfiqar Ali Imran

Governance quality has been a dominant factor to formulate policies for the development of financial institutions in the world. Therefore, this study aims to explore the impact of…

Abstract

Purpose

Governance quality has been a dominant factor to formulate policies for the development of financial institutions in the world. Therefore, this study aims to explore the impact of governance quality on financial institutions along with globalization in the case of Pakistan.

Design/methodology/approach

Time series data from 1996 to 2018 are considered for analysis. The NG-Perron is applied to check the order of integration. In addition, Kim and Perron (2009) structural break unit root test is used to identify break years. The autoregressive distributive lags (ARDL) bound testing approach is used to detect the long-run association among governance quality, financial institutions and globalization.

Findings

The results of unit root analysis show that all series are stationary at a different level of integration, I(0)/I(1). However, the long-run association is detected in the presence of break years. The authors find a positive impact of governance quality to determine financial institutions in the long-short-run. Similarly, globalization also enhances financial institutions but only in long run.

Originality/value

This study fills the gap in the economic literature by exploring the linkages between the financial institution and disaggregated governance indicators in the case of Pakistan. Moreover, a role of structural break is also captured during analysis. This study also opens some new insights for policymaking.

Details

Journal of Economic and Administrative Sciences, vol. 39 no. 2
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 17 October 2023

Niels Mygind

The purpose of this paper is to give an updated overview over the development of employee-ownership in Italy, France, Spain including Mondragon, the UK and the US with relatively…

Abstract

Purpose

The purpose of this paper is to give an updated overview over the development of employee-ownership in Italy, France, Spain including Mondragon, the UK and the US with relatively many employee-owned firms. How have the barriers for employee-ownership been overcome in these countries?

Design/methodology/approach

The overview is based on updated descriptions of the development of employee-ownership included in this special issue. The analysis follows the structure of overcoming five barriers: the organization problem; the problem of entry and exit of employee-owners; the startup and takeover problem; the capital- and the risk problem.

Findings

Italy, France and Spain have overcome the barriers by specific legislation for worker cooperatives, this includes rules for entry and exit of employee members. Cooperative support organizations play an important role for monitoring and managing the startup problem and for access to capital. The Mondragon model includes individual ownership elements and a group structure of cooperatives. The EOT and ESOP models are well suited for employee takeovers, financing are eased by tax advantages and they are all-employee schemes. While the EOT has no individual risks, the ESOP model has the possibility for capital gains for employees but also the risk of losing these gains.

Originality/value

Comprehensive and updated overview of the development in employee-ownership in the five countries to identify successful formats of employee-ownership for implementation in countries with few employee-owned firms.

Details

Journal of Participation and Employee Ownership, vol. 6 no. 3
Type: Research Article
ISSN: 2514-7641

Keywords

Open Access
Article
Publication date: 29 March 2023

Christian Hugo Hoffmann

The purpose of this study is to showcase that the valuation of startups is still considered to be more “art than science”. Moreover, such non-rigorous approaches often lead to…

Abstract

Purpose

The purpose of this study is to showcase that the valuation of startups is still considered to be more “art than science”. Moreover, such non-rigorous approaches often lead to valuations, which turn out to be too high, which in turn has become a well-known phenomenon to a broader audience due to shining examples such as We Work. This is reason enough to revisit the important topic of where we stand today with startup valuation procedures and methodologies.

Design/methodology/approach

Literature synthesis and exploratory analysis.

Findings

While some studies describe sound results about how to assess startups, what the authors found was that many questions remain open or have not been covered at all. This is the reason why the authors needed to apply a substantial amount of reasoning in the analysis of studies, which do not exactly deal with startup companies. The authors provided some interesting impulses for future research.

Originality/value

Based on an original overview of the current state of research about the valuation of startup companies, this paper makes the following principal contribution to both the literature and practice: on the one hand, the authors assess four impact factors on startup values critically; on the other, the authors provide an outlook on promising future research avenues.

Details

Journal of Ethics in Entrepreneurship and Technology, vol. 3 no. 1
Type: Research Article
ISSN: 2633-7436

Keywords

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