External Capital for NTBFs: The Role of Bank and Venture Capital

Int. J. Entrepreneurship and Innovation Management, Vol. 14, Nos. 2/3, 2011

26 Pages Posted: 7 Feb 2014

See all articles by Tommaso Minola

Tommaso Minola

University of Bergamo

Marco Giorgino

Polytechnic University of Milan

Date Written: 2011

Abstract

The objective of our research is to determine what factors at the firm level influence access to external capital for new technology-based firms (NTBFs) and what influences the rank ordering of applying to different sources. Furthermore we investigate whether NTBFs differs from other SMEs. Through an empirical analysis of determinants on UK NTBFs financing, we confirm the existence of a hierarchy between internal and external finance and verify the classic pecking order theory (POT) (preference for banks over venture capital (VC) financing). NTBFs appear more capital demanding than other SMEs. They make significant approaches to banks and are only slightly more credit rationed than other SMEs. The data also confirm that VCs are approached significantly more by NTBFs. Nevertheless, the detailed analysis of the determinants of NTBFs’ fund raising process (demand side) reveals that they do not differ from other SMEs. Our paper terminates with the development of an expert system (Bayesian network) shaped on the empirical evidences collected, which acts as a decision support system for high-tech entrepreneurs engaging in fundraising.

Keywords: entrepreneurial finance; pecking order theory; POT; new technology-based firms; NTBFs; Venture Capital; Bank; Bayesian Network

Suggested Citation

Minola, Tommaso and Giorgino, Marco, External Capital for NTBFs: The Role of Bank and Venture Capital (2011). Int. J. Entrepreneurship and Innovation Management, Vol. 14, Nos. 2/3, 2011. Available at SSRN: https://ssrn.com/abstract=2391687

Tommaso Minola (Contact Author)

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

Marco Giorgino

Polytechnic University of Milan ( email )

vial Lambruschini 4B
Milan, Milan 20156
Italy

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