Title: Financial bootstrapping and social capital: how technology-based start-ups fund innovation

Authors: David Smith

Addresses: Nottingham Business School, Nottingham Trent University, Burton Street, Nottingham, NG1 4BU, UK

Abstract: Innovation requires more than technological expertise. It is a time consuming activity requiring access to a range of resources including finance. Yet, innovators involved in start-ups rarely have direct access to significant financial resources. Instead, they turn to a variety of forms of financial bootstrapping. Defined as access to resources not owned or controlled by the individual innovator, bootstrapping involves imaginative and parsimonious strategies for marshalling and gaining control of resources. This paper reports on research into bootstrapping using case studies, drawn from biographies of well-known innovators. The study found that bootstrapping was widespread and innovators showed great ingenuity in obtaining finance without recourse to conventional financial institutions. Not only were ranges of bootstrapping techniques employed, the study also provided valuable insights into the importance of social capital, in the form of networks of friends, colleagues and other contacts, in providing innovators with access to bootstrapping finance.

Keywords: innovation; finance; start-ups; technical entrepreneurship; financial bootstrapping; social capital; social networks; new ventures.

DOI: 10.1504/IJEIM.2009.025182

International Journal of Entrepreneurship and Innovation Management, 2009 Vol.10 No.2, pp.199 - 209

Available online: 16 May 2009 *

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