Capital structure theory and new technology firms: is there a match?

Purpose - The purpose of this paper is to explore the extent to which various theories of capital structure "fit" in the case of new technology-based firms.Design methodology approach - This study uses data from the Kauffman Firm Survey, a longitudinal data set of over 4,000 firms in the U...

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Bibliographic Details
Published in:Management research news 2012-01, Vol.35 (2), p.106-120
Main Authors: Coleman, Susan, Robb, Alicia
Format: Article
Language:English
Subjects:
Alliances
Angel investors
Annual reports
Capital structure
Collateral
Equity
Funding
Intellectual property
Long term debt
Multivariate analysis
Retained earnings
Small & medium sized enterprises-SME
Small business
Startups
Studies
Venture capital
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Summary:Purpose - The purpose of this paper is to explore the extent to which various theories of capital structure "fit" in the case of new technology-based firms.Design methodology approach - This study uses data from the Kauffman Firm Survey, a longitudinal data set of over 4,000 firms in the USA. Descriptive statistics and multivariate results are provided.Findings - The authors' findings reveal that new technology-based firms demonstrate different financing patterns than firms that are not technology-based.Research limitations implications - Although some support was found for both the Pecking Order and Life Cycle theories, the results also indicate that technology-based entrepreneurs are both willing and able to raise substantial amounts of capital from external sources.Practical implications - Technology-based entrepreneurs need external sources of equity, in particular, in order to launch and grow their firms.Originality value - To the authors' knowledge, this is the first article to test specific theories of capital structure using a large sample of new technology-based firms in the USA.
ISSN:2040-8269
2040-8277
DOI:10.1108/01409171211195143