Start-Up Size: The Role of External Financing
Year: 2005
Type: preprint
Abstract: This study determines the role of different modes of financing in shaping firms' startup size decision. According to the principal hypothesis, the greater the startup's access to bank loans and external private equity, the larger the startup will be. It is also hypothesized that the positive impact of external private financing will be greater than the positive impact of bank financing.Data on 391 new technology-based firms that operate in Italy's manufacturing and service industries are used to test these hypotheses.Econometric analyses of the data reveal that firms that resorted to bank debt were no larger than those that were financed primarily by the personal savings of their founders and by the members of the founders’ social networks.In fact, highly qualified entrepreneurs who procured external private equity financing started operations on a much larger scale those who relied on personal capital and bank debt did. Taken together, the results lend weight to the observation that individuals with greater entrepreneurial ability are more likely to suffer from financial constraints when attempting to launch a venture. (SAA)
Source: SSRN Electronic Journal
Authors: Luca Grilli, Massimo G. Colombo
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124221008