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Does informal risk capital relax the financial constraints of high-tech entrepreneurial ventures?

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  • Massimo G. Colombo
  • Annalisa Croce
  • Massimiliano Guerini

Abstract

This work analyses the effect of informal risk capital financing on a firm's investment/cash flow sensitivity (ICFS) in a sample of 498 Italian privately held high-tech entrepreneurial ventures (HTEVs) observed from 1996 to 2008. To detect financial constraints, we resort to an error correction model (ECM). We find that the receipt of informal risk capital in the seed stage results in reduced ICFS, indicating a persistent relaxation of financial constraints.

Suggested Citation

  • Massimo G. Colombo & Annalisa Croce & Massimiliano Guerini, 2014. "Does informal risk capital relax the financial constraints of high-tech entrepreneurial ventures?," Applied Economics Letters, Taylor & Francis Journals, vol. 21(5), pages 335-339, March.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:5:p:335-339
    DOI: 10.1080/13504851.2013.859368
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