Title: Financing stages of technology-based firms in Germany
Author: Christian Schultz
Address: Department of Economics and Social Sciences, BIEM CEIP – The Institute for Entrepreneurship and Innovation, University of Potsdam, August-Bebel-Strasse 89, D-14482 Potsdam, Germany
Abstract: In this paper, we use a capital life stage model to characterise the capital structure of technology-based firms. First, the relevant work on technology-based firms and the financial growth cycle theory is presented. Hypotheses regarding the level of leverage and the mixture of short-term and long-term debt are developed and grounded in the relevant literature. Then, an integrated capital life stage model for technology-based firms is designed. The model is tested on data of a sample of technology-based firms of the two sectors of leading-edge engineering (R&D intensity above 8.5%) and high-technology engineering (R&D intensity above 3.5%) founded between 1990 and 2005 in Germany. The technological complexity has no observable influence on the level of equity and debt. Only slightly different levels of equity and debt can be observed. While the firms mature, equity is substituted by debt. Differences in the mixture of short and long-term debt are found in the growth stage of the sectors' companies. In the last section, explanations for these findings are discussed and the significance of the study for practitioners and researchers as well as limitations and further areas of research are outlined.
Keywords: capital structures; life stages; new technology; technology-based firms; Germany; high-tech engineering; leading-edge engineering; high technology; growth cycles; financial growth; leverage; short-term debt; long-term debt; R&D intensity; research and development; technological complexity; equity levels; mature firms; entrepreneurship; innovation management; entrepreneurial finance.
Int. J. of Entrepreneurship and Innovation Management, 2011 Vol.14, No.2/3, pp.206 - 221
Available online: 02 Aug 2011