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Capital structure theory and new technology firms: is there a match?

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  • Susan Coleman
  • Alicia Robb

Abstract

Purpose - The purpose of this paper is to explore the extent to which various theories of capital structure “fit” in the case of new technology‐based firms. Design/methodology/approach - This study uses data from the Kauffman Firm Survey, a longitudinal data set of over 4,000 firms in the USA. Descriptive statistics and multivariate results are provided. Findings - The authors' findings reveal that new technology‐based firms demonstrate different financing patterns than firms that are not technology‐based. Research limitations/implications - Although some support was found for both the Pecking Order and Life Cycle theories, the results also indicate that technology‐based entrepreneurs are both willing and able to raise substantial amounts of capital from external sources. Practical implications - Technology‐based entrepreneurs need external sources of equity, in particular, in order to launch and grow their firms. Originality/value - To the authors' knowledge, this is the first article to test specific theories of capital structure using a large sample of new technology‐based firms in the USA.

Suggested Citation

  • Susan Coleman & Alicia Robb, 2012. "Capital structure theory and new technology firms: is there a match?," Management Research Review, Emerald Group Publishing Limited, vol. 35(2), pages 106-120, January.
    • Handle: RePEc:eme:mrrpps:v:35:y:2012:i:2:p:106-120
    DOI: 10.1108/01409171211195143
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    Citations

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    Cited by:

    1. James Dominic, 2020. "Decoding Venture Capital Exit Patterns: An Indian Perspective," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(9), pages 956-969, September.
    2. Joseph Farhat & Sharon Matusik & Alicia Robb & David T. Robinson, 2018. "New directions in entrepreneurship research with the Kauffman Firm Survey," Small Business Economics, Springer, vol. 50(3), pages 521-532, March.
    3. Marcin Kedzior & Barbara Grabinska & Konrad Grabinski & Dorota Kedzior, 2020. "Capital Structure Choices in Technology Firms: Empirical Results from Polish Listed Companies," JRFM, MDPI, vol. 13(9), pages 1-20, September.
    4. Rama Iyer, Subramanian & Sankaran, Harikumar & Walsh, Steve T., 2020. "Influence of Director Expertise on Capital Structure and Cash Holdings in High-Tech Firms," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    5. Burger, Anže & Hogan, Teresa & Kotnik, Patricia & Rao, Sandeep & Sakinç, Mustafa Erdem, 2023. "Does acquisition lead to the growth of high-tech scale-ups? Evidence from Europe," Research in International Business and Finance, Elsevier, vol. 64(C).
    6. Masiak, Christian & Moritz, Alexandra & Lang, Frank, 2017. "Financing Patterns of European SMEs Revisited: An Updated Empirical Taxonomy and Determinants of SME Financing Clusters," EIF Working Paper Series 2017/40, European Investment Fund (EIF).
    7. Neville, Conor & Lucey, Brian M., 2022. "Financing Irish high-tech SMEs: The analysis of capital structure," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Vandana Bhama & P.K. Jain & Surendra S. Yadav, 2017. "Pecking Order among Select Industries from India and China," Vision, , vol. 21(1), pages 63-75, March.
    9. Adalberto Rangone & Luca Busolli, 2021. "Managing charity 4.0 with Blockchain: a case study at the time of Covid-19," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 18(4), pages 491-521, December.
    10. Alexandra Moritz & Joern H. Block & Andreas Heinz, 2016. "Financing patterns of European SMEs -- an empirical taxonomy," Venture Capital, Taylor & Francis Journals, vol. 18(2), pages 115-148, April.
    11. Mina, Andrea & Minin, Alberto Di & Martelli, Irene & Testa, Giuseppina & Santoleri, Pietro, 2021. "Public funding of innovation: Exploring applications and allocations of the European SME Instrument," Research Policy, Elsevier, vol. 50(1).
    12. Hirsch, Julia & Walz, Uwe, 2019. "The financing dynamics of newly founded firms," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 261-272.
    13. Maria Kokoreva & Anastasia Stepanova & Kirill Povk, 2017. "Could High-Tech Companies Learn from Others While Choosing Capital Structure?," HSE Working papers WP BRP 62/FE/2017, National Research University Higher School of Economics.
    14. Power Jane & Power Bernadette & Ryan Geraldine, 2022. "Determinants of equity financing: a demand-side analysis of Irish indigenous technology-based firms," The Irish Journal of Management, Sciendo, vol. 41(1), pages 52-68, July.
    15. Yuliyan Mitkov, 2020. "A Theory of Debt Maturity and Innovation," ECONtribute Discussion Papers Series 050, University of Bonn and University of Cologne, Germany.
    16. Miglo, Anton, 2022. "Theories of financing for entrepreneurial firms: a review," MPRA Paper 115835, University Library of Munich, Germany.
    17. Jonathan Taglialatela & Andrea Mina, 2021. "Innovation, asymmetric information and the capital structure of new firms," LEM Papers Series 2021/36, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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