Where Does the Money Come from? The Financing of Small Entrepreneurial Enterprises

48 Pages Posted: 7 Nov 2008

See all articles by Zsuzsanna Fluck

Zsuzsanna Fluck

Michigan State University - Department of Finance

Douglas Holtz-Eakin

Syracuse University; National Bureau of Economic Research (NBER)

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 1998

Abstract

Using data from the Wisconsin Entrepreneurial Climate Study, we study the sources of firms' finance during the very early stages of their lives. Our focus is the evolution of the mix of financial capital from 'insiders' and 'outsiders' as firms age. We find that at the beginning of firms' life cycles, the proportion of funds form internal sources increases with age, while the proportion from banks, venture capitalists, and private investors declines. There is also evidence that these patterns eventually reverse themselves, with the proportion of insider finance ultimately declining and the proportion of outsider finance increasing with age. We argue that these findings are consistent with elements of both reputation-based and monopoly-lender theories of firm finance.

Suggested Citation

Fluck, Zsuzsanna and Holtz-Eakin, Douglas and Rosen, Harvey S., Where Does the Money Come from? The Financing of Small Entrepreneurial Enterprises (February 1998). NYU Working Paper No. FIN-98-038. Available at SSRN: https://ssrn.com/abstract=1297105

Zsuzsanna Fluck (Contact Author)

Michigan State University - Department of Finance ( email )

Eli Broad Graduate School of Management
315 Eppley Center
East Lansing, MI 48824-1122
United States
517-353-3019 (Phone)
517-432-1080 (Fax)

Douglas Holtz-Eakin

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States
315-443-3612 (Phone)
315-443-3717 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvey S. Rosen

Princeton University - Department of Economics ( email )

001 Fisher Hall
Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
423
rank
66,678
Abstract Views
1,617
PlumX Metrics