Title: Ethnicity and acquisition of external capital at start-up stage: differences between small native Swedish- and immigrant-owned firms

Authors: Darush Yazdanfar; Saeid Abbasian

Addresses: Department of Social Sciences, Mid Sweden University, Regementsgatan 25-27, Östersund 831 25, Sweden. ' Department of Social Sciences, Mid Sweden University, Regementsgatan 25-27, Östersund 831 25, Sweden

Abstract: The aim of the study was to explain empirically the differences in external financing between native- and immigrant-owned small businesses in terms of ethnicity and other relevant variables. A sample of 2,814 native- and immigrant-owned small businesses, based on a unique and comprehensive database gathered through interviews, was analysed employing several univariate and multivariate methods. The results suggest that ethnicity is an important explanatory variable differentiating between acquisitions of external capital at start-up stage. Owner characteristics such as age, experience of starting businesses and education also have an impact on finance-seeking behaviour and thereby on the acquisition of external capital. The findings indicate that characteristics of the firm, such as personal start-up capital, firm size, legal form and industrial sector, do partly influence access to external capital. Since knowledge about this issue is limited, the results of this study add to our understanding of variables affecting the behaviour of small business endeavours in seeking funding at start-up.

Keywords: small business finance; ethnicity; informal capital sources; start-ups; bank loans; external capital; small firms; native firms; Sweden; immigrant-owned firms; immigrants; owner characteristics; entrepreneurship; funding.

DOI: 10.1504/IJBG.2012.050909

International Journal of Business and Globalisation, 2012 Vol.9 No.4, pp.442 - 460

Published online: 20 Aug 2014 *

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