The role of signals in new venture financing in the context of an emerging market: a configurational approach

Purpose - This study proposes a portfolio of new venture signals that are likely to attract investors' attention in the context of an emerging market and examines how they work in combination to affect the likelihood of obtaining funding. Design/methodology/approach - The authors use data on early-stage venture capital investments for high-tech start-ups in Turkey. The authors adopt a configurational approach and use fuzzy QCA and regression analysis. Findings - The findings suggest that financing of new ventures in an emerging economy is shaped by signals of context-specific capabilities that are required to survive and thrive in this market environment alongside and in interaction with signals of general capabilities required for business success. Different combinations of these signals provide equifinal pathways to obtain funding. Furthermore, signals that differ in type and content interact in complex ways to affect investors' decisions. Practical implications - The findings suggest that entrepreneurs with no prior experience in the emerging market context can increase their chances of obtaining funding by affiliating with a venture development organization. Another promising strategy is to form a founding team that includes members affiliated with a developed country together with members who have emerging market experience. Finally, entrepreneurs may consider combining signals of context-specific capabilities with signals of general capabilities as they work in a complementary way to attract funding. Originality/value - This study addresses two major shortcomings of the literature on new venture signaling, first, by positing the emerging market context as a unique signaling environment and, second, by demonstrating the value of considering signals as portfolios with potential interdependencies.