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Article
Publication date: 27 January 2012

Andrew Atherton

This paper seeks to understand the dynamics of new venture financing across 20 business start‐ups.

Abstract

Purpose

This paper seeks to understand the dynamics of new venture financing across 20 business start‐ups.

Design/methodology/approach

A total of 20 cases were explored, via initial discussions with the founder(s), and follow‐up contact to confirm sources of financing acquired during new venture creation. This approach was adopted because of the challenges associated with acquiring full details of start‐up financing, and in particular informal forms of new venture financing.

Findings

Significant variation in, and scale of, new venture financing was identified. In multiple cases, funding patterns did not tally with established explanations of small business financing.

Research limitations/implications

The primary limitation of the analysis is the focus on a small number of individual cases. Although this allowed for more detailed analysis, it does not make the findings applicable across the small business population as a whole. New ventures acquired very different forms of finance, and in different configurations or “bundles”, so creating a wide range of start‐up financing patterns and overall levels of capitalisation. This suggests that multiple factors influence founder decisions on start‐up funding acquisition. It also indicates the wide divergence between highly capitalised and under‐capitalised start‐ups.

Practical implications

Many of the new ventures were started with low levels of capitalisation, which as the literature suggests is a strong determinant of reduced prospects for survival. This suggests a possible “financing deficit”, rather than gap, for a proportion of business start‐ups.

Originality/value

The paper provides an alternative methodology for considering new venture financing, and as a result concludes that standard, rational theories of small business financing may not always hold for new ventures.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 18 no. 1
Type: Research Article
ISSN: 1355-2554

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Article
Publication date: 3 December 2019

Hanvedes Daovisan and Thanapauge Chamaratana

The purpose of this paper is to understand the sources of financing accumulation that women entrepreneurs of family businesses use for start-up capital in the garment…

Abstract

Purpose

The purpose of this paper is to understand the sources of financing accumulation that women entrepreneurs of family businesses use for start-up capital in the garment sector of the Lao People’s Democratic Republic (Lao PDR).

Design/methodology/approach

This study presents insights gleaned from a qualitative case study into the ways in which women in Lao PDR finance their family businesses in the start-up phase. The authors conducted 36 in-depth interviews – the study used this purposive sample in each of its five rounds of data collection. The data were collected between December 2018 and April 2019 and were analysed by conducting a content analysis assisted by the software programme ATLAS.ti.

Findings

The results, though highly case specific, show Lao women’s ability to: accrue their experience, apply their knowledge, engage in self-employment, support their families and aspire to become entrepreneurs. The findings clearly illustrate that women are opportunity and necessity driven, can accumulate income, possess savings behaviour, can manage working capital, investment and accounting and have access to finance (loan and debt) and thus have the potential to become successful entrepreneurs.

Originality/value

By contextualizing women’s entrepreneurial practices, the paper contributes to an understanding of the sources of financing accumulation used for start-up capital in Vientiane, Lao PDR. Theoretically, the paper extends the knowledge of women entrepreneurs seeking the optimal stock of finance which has the potential to drive family business success.

Details

Journal of Family Business Management, vol. 10 no. 3
Type: Research Article
ISSN: 2043-6238

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Article
Publication date: 1 April 2002

Stratos Papadimitriou and Panos Mourdoukoutas

This article takes a close look at the ways US, Israeli, and Irish policy makers have addressed the start‐up equity‐financing gap. US policy makers have been indirect…

Abstract

This article takes a close look at the ways US, Israeli, and Irish policy makers have addressed the start‐up equity‐financing gap. US policy makers have been indirect, providing funds and creating the regime conducive to the growth of the private venture capital industry. Israeli policy makers have been less indirect, taking equity positions in start‐ups, and in venture capital funds in partnership with the private sector. Irish policy makers have been direct, setting up and managing start‐up venture capital funds.

Details

European Business Review, vol. 14 no. 2
Type: Research Article
ISSN: 0955-534X

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Article
Publication date: 20 January 2012

Eric Osei‐Assibey, Godfred A. Bokpin and Daniel K. Twerefou

The purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of…

Abstract

Purpose

The purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of financing sources beyond what is typically the case within the corporate finance literature.

Design/methodology/approach

Under the framework of ordinal logistic regression, the paper also tests whether there is evidence of hierarchical preference ordering as predicted by pecking order theory (POH) using field survey data for 2009.

Findings

The authors relate that new enterprises are more likely to prefer low cost and less risky or less formal financing such as internal or bootstrap finances. However, as the enterprise gets established or matures, its capacity to seek formal financing increases, thereby becoming more likely to prefer or being in a higher category of formal financing. While the paper affirms the POH, it is argued that this order is a consequence of severe persistent constraints other than sheer preference. The findings further reveal that, microentrepreneur's and MSE's‐specific level socio‐economic characteristics such as owner's education or financial literacy status, households tangible assets, ownership structure, enterprise size, as well as sensitivity to high interest rates in the credit market, to be important determinants of either past (start‐up), present or future financing preference.

Originality/value

The main value of this paper is to analyse the determinants of financing preference of MSEs within the context of rural financial market (RFM) from a developing country perspective.

Details

Journal of Economic Studies, vol. 39 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Content available
Article
Publication date: 1 March 2015

Enrique Nunez

Using the Panel Study of Entrepreneurial Dynamics II dataset, we examine the role that household income plays in the emergence of consumer-oriented start-ups by individual…

Abstract

Using the Panel Study of Entrepreneurial Dynamics II dataset, we examine the role that household income plays in the emergence of consumer-oriented start-ups by individual (solo), family-based (family), and non-family based start-ups (team). In particular, we address the research question: Does household income impact firm emergence, and if so, is emergence impacted differently based on start-up configuration? Our results indicate that household income does have a significant impact on average firm emergence, as well as on emergence growth rates for solo and family firms, playing an especially significant role for family firms. Furthermore, we found that household income is not a significant predictor of start-up activity completion for teams. Results from our study reinforce the extant literature on the benefits of starting a firm with teams, and suggests that these enterprise types may provide a more stable platform on which to launch a start-up. Implications of these findings and opportunities for future research are offered.

Details

New England Journal of Entrepreneurship, vol. 18 no. 2
Type: Research Article
ISSN: 2574-8904

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Book part
Publication date: 19 September 2014

Alicia Robb and Robert Seamans

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…

Abstract

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.

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Article
Publication date: 6 November 2017

David Wille, Adam Hoffer and Stephen Matteo Miller

The purpose of this paper is to examine the status of small-business lending following the recession.

Abstract

Purpose

The purpose of this paper is to examine the status of small-business lending following the recession.

Design/methodology/approach

The authors survey the literature and analyze recent surveys of small-business lending.

Findings

The results reinforce the importance of owner equity as a primary source of small-business financing. In addition, the authors find that small firms have been seeking and obtaining less capital since the 2008 financial crisis.

Research limitations/implications

The findings about the main sources of small-business financing will be informative when formulating financial regulation.

Social implications

The available evidence suggests that new regulation of the financial services industry may be restricting access to products that small-business owners rely on and may adversely affect small banks.

Originality/value

The authors offer the most recent analysis of small-business financing, focusing on changes that may have been caused by the recession and major financial regulations.

Details

Journal of Entrepreneurship and Public Policy, vol. 6 no. 3
Type: Research Article
ISSN: 2045-2101

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Article
Publication date: 14 August 2007

Javed Hussain and Harry Matlay

The purpose of this research is to show that while mainstream finance for small businesses has been researched, hard to reach segments of the UK owner/manager population…

Abstract

Purpose

The purpose of this research is to show that while mainstream finance for small businesses has been researched, hard to reach segments of the UK owner/manager population have eluded empirically rigorous investigation. The authors investigate the financing preferences of owner/managers in small ethnic minority businesses in the UK and examine their access to both formal and informal finance as well as the use of personal funding networks. The emergent results are compared with the findings from a matched “control sample” of white small business owner/managers.

Design/methodology/approach

Identical, in‐depth, face‐to‐face interviews were used with a sample of ethnic minority small business owner/managers and a matched control sample of white respondents in the West Midlands region of the UK.

Findings

Family and close associate networks were very important for the support of both ethnic minority and white owner/managers. All the respondents required loans from banks and other financial institutions, both at the start‐up stage and in subsequent years. For the ethnic minority owner/managers, the initial importance of financial institutions declined over the years. In contrast, in the control sample, institutional borrowing needs increased considerably. Ethnic minority owner/managers showed a preference for less intrusive and more “user friendly” financing options that allow them to remain in full control of their businesses.

Practical implications

Caution is advised in the use and generalisation of results emerging from qualitative research that involves small samples of respondents chosen from a restricted area of the UK.

Originality/value

The research shows the importance of “user‐friendly” financing options for owner/managers.

Details

Journal of Small Business and Enterprise Development, vol. 14 no. 3
Type: Research Article
ISSN: 1462-6004

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Article
Publication date: 15 January 2020

Hui Zhang, Ying Chen and Xiaohu Zhou

The purpose of this paper is to investigate ways to mitigate gender bias in entrepreneurial financing. The authors aim to unveil the role entrepreneurs’ gender played in…

Abstract

Purpose

The purpose of this paper is to investigate ways to mitigate gender bias in entrepreneurial financing. The authors aim to unveil the role entrepreneurs’ gender played in formal and informal financing under Chinese context, as well as the moderating role corporate social responsibility (CSR) played in such relationships.

Design/methodology/approach

This paper adopts ANOVA test and multiple regression method to empirically examine the relationship of entrepreneurs’ gender, formal financing, informal financing and CSR with second hand data from The Eleventh Private Enterprise Survey covering a sample of firms across China.

Findings

The results demonstrate that comparing to start-ups led by men, start-ups led by women are less likely to get either formal or informal financing. The results also suggest that CSR negatively moderates the impact entrepreneurs’ gender has on formal financing but not on informal financing.

Originality/value

By focusing on both formal and informal financing, the research of gender’s effects on firms’ financing has been extended. Also, by proving that CSR can help to mitigate gender bias in formal financing, contribution has also been made to the research field of gender financing. This paper contributes to the CSR literature by sorting out another benefit CSR has in new venture financing. Overall, findings of this study deepen the existing understanding of gender issues in the context of entrepreneurial financing.

Details

Chinese Management Studies, vol. 14 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 9 April 2020

Ruslan Prijadi, Permata Wulandari, Putri Mega Desiana, Fajar Ayu Pinagara and Maya Novita

The purpose of this paper aims to investigate micro enterprises financing in Indonesia and examines how this financing differs, depending on the enterprise’s development…

Abstract

Purpose

The purpose of this paper aims to investigate micro enterprises financing in Indonesia and examines how this financing differs, depending on the enterprise’s development stage. This research also identifies some structural problems related to micro-financing and provides workable solutions.

Design/methodology/approach

This research uses the entrepreneurial network model of Schutjens and Stam (2003) to examine how Indonesian micro and small enterprises (MSEs) evolve even before they become regular small businesses. Content analysis is used on 10 micro-enterprises from Jakarta, the capital city of Indonesia and its surroundings. Financing issues at each stage of enterprise development are identified and deeply examined.

Findings

This research not only confirms the significant financing problems micro-enterprises face but also clarifies that these problems are unique to each stage of the MSEs’ development. One insight is that most micro-enterprises do not use funding from formal institutions. That is, business owners rely more on funding from non-formal institutions. This is because these enterprises’ managers generally cannot prepare loans application and/or they are lack of knowledge/training on financing matters. They hesitate to borrow from formal financial institutions, as the rates are high but the processing time is longer than those of the loan sharks.

Originality/value

This research contributes to the field of entrepreneurial finance by identifying the structural problems inherent in micro-finance and providing workable solutions for overcoming these problems.

Details

International Journal of Ethics and Systems, vol. 36 no. 2
Type: Research Article
ISSN: 2514-9369

Keywords

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