Title: Financing patterns in new technology-based firms: an extension of the pecking order theory

Authors: Tommaso Minola; Lucio Cassia; Giuseppe Criaco

Addresses: Center for Young and Family Enterprise; Department of Economics and Technology Management, University of Bergamo, viale Marconi 5, 24044 Dalmine (BG), Italy ' Center for Young and Family Enterprise; Department of Economics and Technology Management, University of Bergamo, viale Marconi 5, 24044 Dalmine (BG), Italy ' Centre for Family Enterprise and Ownership (CeFEO), Department of Entrepreneurship, Strategy, Organization and Leadership, Jönköping International Business School, Jönköping, Sweden; Department of Business Economics & Administration, Autonomous University of Barcelona, Cerdanyola del Vallès, Barcelona, Spain

Abstract: Understanding financial strategies and patterns of new firms is crucial to the theoretical unravelling of the entrepreneurial process as well as to the elaboration of appropriate support programs from practitioner and policy maker. The aim of this paper is to investigate whether a pecking order theory underlies the financing strategies of new technology-based firms (NTBFs). From the analysis of previous literature on the subject, controversial results emerge: while some authors have confirmed a traditional pecking order theory for NTBFs, others, on grounds of NTBFs major financial constraints derived from higher information asymmetry, have proposed a revised pecking order, where access to equity (in particular private equity) occurs prior to debt. This research has been carried out applying an approach based on estimation of internal financial gap (Cosh et al., ECOJ 119:71494-1533, 2009) using data from the Kauffman Firm Survey. Additionally, we extend the pecking order prediction by examining the effect of human capital as determinants for financing decisions, given its crucial role in shaping entrepreneurial dynamics of NTBFs. Our results support the existence of a revised pecking order in the case of NTBFs; moreover entrepreneur's age and experience play a role in clarifying financial priorities of NTBFs.

Keywords: new technology-based firms; NTBF; pecking order theory; POT; entrepreneurial finance; financing patterns; human capital; age; entrepreneurial experience; entrepreneurship; human capital.

DOI: 10.1504/IJESB.2013.054964

International Journal of Entrepreneurship and Small Business, 2013 Vol.19 No.2, pp.212 - 233

Available online: 20 Jun 2013 *

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