School of Business, University of Applied Sciences Kiel – Germany b. [email protected] This paper presents a research project in the field of empirical entrepreneurial finance.
The project aims to explain the effects that different financing options have on the performance of private owned business for example startups.
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The stronger the outcomes like financial performance, innovation etc. is linked to financing options and with that to potential network effects, the easier it is for actors (e.
investors or government) to eval-uate a venture and make their decisions.
Keywords: Entrepreneurship; Finance; Corporate; Venture; Capital; Network 1. However for the development of networks in entrepreneurship, there is till now less empirical confirmation. (Hoang & Antoncic, 2003) This paper will give an overview of a research project in the field of empirical entrepreneurial finance. In the Nordic countries most economic activity takes place in small and medium sized firms who are private owned.
This leads to data limitations which made it for past research difficult to deal with those kind of businesses.
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Governmental bodies store data about business, their financial situa-tion as well as their innovative actions and employment situation (e. work effects that different financing options of private businesses have and how that influence their economic performance (e.
networks have an effect on the performance of businesses. Their research has shown that multiple organizations act in networks.
In addition to the fact that vanure capital firms have according to Spiegel & Tookes (2008) a M lardalen University – project proposal positiv effect on various parts of the business, this leads to the following research question: How do networks between financial actors and other organizations influ-ence the performance of private owned businesses? papers related to network theory in entrepre-neurship were published. Indeed only partial empirical evidence was given that network effects have an impact on entrepreneurship. (Hoang & Antoncic, 2003) Especially when it comes to financing, networks plays an im-portant role in order to get financing through for example venture capital.
(Freeman, 1999) Previous research has shown that the financing through venture capital can drive innovations and that the companies can profit from the network of the venture capitalists.
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(Chemmanur, Krishnan, & Nandy, 2011) Academics also argue that high reputa-tion venture capitalists (VC) perform better in providing additional services in order to im-prove the performance of the company they are invested in Full-Text Paper (PDF): Draft research proposal in entrepreneurial finance. It is using network theory in order to explain differences in the performance or the drive of innovations by having different How do networks between financial..
This can also be seen in the statement of Bygrave and Timmons (1992) who said that it is more important from whom you get the money then how much.
However empirical evidence on whether VC firms cre-ate significant value in addition to the money for their clients were done barely in the past. According to Chemmanur, Krishnan, & Nandy (2011) the reason for this could be because a limit in access to data on private firms.
The outcome of this study can adress the problems that government or policy makers have when facing the question on how to stimulate employment, investments in small or medium sized firms or how to drive innovations. Furthermore investors can profit from the outcome in the way that they can assess their risk and return by looking at the relationships of the target company to other organizations.
work of this study and will present theory and related literature to the research question. Network Theory network of multiple institutions that work to-gether with each other in order to create value. M lardalen University – project proposal This contains suppliers, customers, competi-tors.
(Hakansson & Snehota, 2006) In this set up investors can also be seen as suppliers since they supply capital to the target firm.
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Studies have shown that this is more the rule then an exception.
(Hakansson & Snehota, 2006) When it comes to inter or-ganizational relationships, a set of interde-pendencies evolves Guidance on Writing an Outline Research Proposal. In order to assess your application, it is helpful to see an outline of the research area in which you would like .
Activities of both actors are connected to each other and will influence each other. (Ford, Hakansson, & Johanson, 1986) The network model can be summarized with the following points: ments where their actions are influ-enced by a limited number of actors which act in a unique way with own goals.
continues relationships and interact in multiple exchange processes which makes it possible to access and exploit the resources from the counterparts. Furthermore the activities of the parties can be linked together.
ops with its interactions and relation-ships with other parties in the network. By maintaining these relationships that interactions create the identity of the organization.
panies of the network act under the similar conditions, the organization’s performance is conditioned by the network even when it comes to inter-dependencies among third parties. venture capital firms have an influence on their targets beyond the financing.
(Bygrave & Timmons, 1992) Financial resources are cru-cial for the success of businesses especially to withstand sustained losses His/her particular research project, the budget process can be started. It is vital to become the financial plan used by the funding agency to provide support. When NIH will not ask for these details, they are important to have on hand when..
This vulnerability that especially small privately owned firms have, is known as liability of newness.
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(Zimmerman & Zeitz, 2002) This enables small companies to access resources that are needed to survive or to grow. En-dorsements by respectable venture capital firms signals the quality of a startup and cre-ates confidence among other stakeholders in the company.
behavior that stakeholders look at the venture capital firm when deciding whether to engage in an action with the small firm. (Deeds, Mang, & Frandsen, 1997) tive role and may influence the company be-yond providing financial resources, bank loans and other non-active investment provides the M lardalen University – project proposal company with financial resources in order to reduce bankruptcy and support growth.
Ac-cording to Myers and Majluf (1984) compa-nies would, by applying the pecking-order theory of capital structure choice, prefer debt financing over equity in order to have lower costs of capital. The reason for that is the in-formation asymmetry between the company and the investors which is in private owned business high due to less transparency and would lead to higher expected returns on capi-tal by the investors.
tions should take the interests of other stake-holder into consideration when making strate-gic decisions. , 1984) This can be seen by implication that the company is de-pendent on other stakeholder while creating value. However the stakeholder approach is not clear defined and literature contains vari-ous different concepts for the term “Stakhole-der” (Wagner, Alves, & Raposo, 2011) According to Donaldson and Preston (1995) the stakeholder theory cannot be seen as a sin-gle theory rather than multiple theories for the management of stakeholders. In their frame-work they divided three approaches: (Friedman & Miles, 2006) erates in terms of stakeholder man-agement) tional objectives through stakeholder For connecting this concept to the other theo-ries and in order to answer the research ques-tion the instrumental approach fits the best since it focuses on how to reach the objectives that the company has (e.
This theory can explain the relationships that a company gets throughout the financing partner. Expected Results show that financing through active investors (e. venture capital, private equity or angel investors) will have a positive influence of the firm’s performance due to its active involve-ment and the usage of network effects. This access to networks in terms of access to re-sources like employees, more capital, custom-ers and suppliers will give these companies the potential for a faster growth as its competitors who are financed through non active investors such as banks.
have an impact on how institutional investors evaluate business ventures when it comes to investment decisions as well as how the gov-ernment supports business ventures. The learned effects of the relationships between the actors in the network and the influence on the company’s performance can also be used for public policies to stimulate employment, in-vestment and innovation.
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