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The Survival of Start-Ups: Do Their Funding Choices and Bank Relationships at Birth Matter?

43 Pages Posted: 13 Dec 2006  

Maria Luísa Alcoforado Farinha

Bank of Portugal

João A. C. Santos

Federal Reserve Bank of New York

Date Written: November 2006

Abstract

In this paper we seek evidence for the theory that start-ups' founding choices imprint them, affecting their chances of survival for a long period of time. Based on a unique dataset of Portuguese start-ups, we find that larger start-ups and start-ups with less leverage are more likely to survive for longer periods of time. The same is true of start-ups that opt for maintaining a unique bank-lending relationship and those that have a bank among their shareholders. Lending relationships with state-owned banks do not affect these firms' chances of survival. Our investigation into the effects of start-ups' founding choices of these variables shows that their founding size and leverage as well as the mix of funding sources that they choose at birth affect their chances of survival for several years. Importantly, the future effects of some of these choices do not decay as firms age, providing, therefore, support to the theory that start-ups' founding choices imprint them.

Keywords: Start-ups, funding sources, lending relationships, bank equity stakes in firms

JEL Classification: G24, G33, L33

Suggested Citation

Alcoforado Farinha, Maria Luísa and Santos, João A. C., The Survival of Start-Ups: Do Their Funding Choices and Bank Relationships at Birth Matter? (November 2006). Available at SSRN: https://ssrn.com/abstract=950978 or http://dx.doi.org/10.2139/ssrn.950978

Maria Luísa Alcoforado Farinha

Bank of Portugal ( email )

Av. Almirante Reis, 71
1150 Lisbon
Portugal
351-21-3128350 (Phone)

João A. C. Santos (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

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