Financing Patterns in New Technology-Based Firms: An Extension of the Pecking Order Theory

International Journal of Entrepreneurship and Small Business, Vol. 19, No. 2, 2013

22 Pages Posted: 20 Aug 2013

See all articles by Tommaso Minola

Tommaso Minola

University of Bergamo

Lucio Cassia

University of Bergamo - SIGE Sezione di Ingegneria Gestionale

Giuseppe Criaco

Jonkoping University - Jonkoping International Business School (JIBS)

Date Written: August 19, 2013

Abstract

Understanding financial strategies and patterns of new firms is crucial to the theoretical unraveling of the entrepreneurial process as well as to the elaboration of appropriate support programs from practitioner and policy maker. The aim of this paper is to investigate whether a pecking order theory underlies the financing strategies of new technology-based firms (NTBFs). From the analysis of previous literature on the subject, controversial results emerge: while some authors have confirmed a traditional pecking order theory for NTBFs, others, on grounds of NTBFs major financial constraints derived from higher information asymmetry, have proposed a revised pecking order, where access to equity (in particular private equity) occurs prior to debt. This research has been carried out applying an approach based on estimation of internal financial gap (Cosh et al., ECOJ 119:71494-1533, 2009) using data from the Kauffman Firm Survey. Additionally, we extend the pecking order prediction by examining the effect of human capital as determinants for financing decisions, given its crucial role in shaping entrepreneurial dynamics of NTBFs. Our results support the existence of a revised pecking order in the case of NTBFs; moreover entrepreneur’s age and experience play a role in clarifying financial priorities of NTBFs.

Keywords: new technology-based firms, NTBF, pecking order theory, POT, entrepreneurial finance, financing patterns, human capital, entrepreneur’s age, entrepreneur’s experience

Suggested Citation

Minola, Tommaso and Cassia, Lucio and Criaco, Giuseppe, Financing Patterns in New Technology-Based Firms: An Extension of the Pecking Order Theory (August 19, 2013). International Journal of Entrepreneurship and Small Business, Vol. 19, No. 2, 2013 , Available at SSRN: https://ssrn.com/abstract=2312648

Tommaso Minola (Contact Author)

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

Lucio Cassia

University of Bergamo - SIGE Sezione di Ingegneria Gestionale ( email )

Via Pasubio 7b
Dalmine, Bergamo 24044
Italy

Giuseppe Criaco

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

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