Ready or not?: Nascent entrepreneurs' actions and the acquisition of external financing
2021 (English)In: International Journal of Entrepreneurial Behaviour & Research, ISSN 1355-2554, E-ISSN 1758-6534, Vol. 27, no 6, p. 1605-1628Article in journal (Refereed) Published
Abstract [en]
Purpose
This study offers empirical evidence from a nationally representative panel dataset of nascent entrepreneurs (PSED-II) regarding when external financing is acquired and how certain factors affect this timing during the cumulative process of nascent entrepreneurs taking actions toward establishing an operational entity. By assessing the relationship between the external financing event and the cumulative set of actions that nascent entrepreneurs undertake to create new businesses, we improve our understanding of how the timing of acquiring external financing affects organizational survival and growth.
Design/methodology/approach
We apply nonparametric and semiparametric survival analysis techniques to a nationally representative panel dataset of nascent entrepreneurs. This ascertains the probability of an external financing event at any given moment in time and a set of startup conditions that we hypothesize will affect this timing. First, we use Kaplan-Meier analysis to explore when external financing occurs during new business creation. We then use discrete-time survival analysis to investigate whether certain startup conditions affect when external financing occurs. Finally, we conduct a test of independence to examine the external financing event relative to other startup activities completed during new business creation.
Findings
Nascent entrepreneurs tend to acquire external funding relatively late in the new venture startup process - on average, about two-thirds of the way from conceiving of the idea and becoming operational. They tend to take actions that are less resource-demanding early in the startup process to build their organizations to a fundable stage. Net worth tends to speed up the acquisition of external funding as wealthy entrepreneurs tend to ask for funding earlier in the process. Finally, entrepreneurs in capital-intensive industries do not seem to get outside funding before entrepreneurs in other industries.
Originality/value
This study is unique in three ways. First, we investigate the timing of the highly important external financing event. Timing is critical in unpacking and making sense of the very early stages of a new business and in guiding entrepreneurs and students about when to do what. Second, we do so in a subsample of preoperational, nascent, funded entrepreneurs derived from a nationally representative panel dataset of startup attempts. Third, our findings provide a counter-intuitive yet systematic understanding of organizational emergence and very early-stage financing.
Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2021. Vol. 27, no 6, p. 1605-1628
Keywords [en]
Nascent entrepreneur, Startup financing, Organizational emergence, Startup activities, Startup process, Business creation process
National Category
Economics and Business
Research subject
Economy, Ledarskap, entreprenörskap och organisation
Identifiers
URN: urn:nbn:se:lnu:diva-105893DOI: 10.1108/IJEBR-09-2020-0586ISI: 000662710000001Scopus ID: 2-s2.0-85107870000Local ID: 2021OAI: oai:DiVA.org:lnu-105893DiVA, id: diva2:1580227
2021-07-132021-07-132023-04-20Bibliographically approved