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How Do Entrepreneurial Technology Firms Really Get Financed, And What Difference Does It Make?

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  • KELVIN W. WILLOUGHBY

    (Munich Intellectual Property Law Center (MIPLC), Max-Planck-Institut für Geistiges Eigentum, Wettbewerbs- und Steuerrecht, Marstallplatz 1, 80539 München, Germany)

Abstract

This paper discusses an emerging heterodoxy in the academic literature on entre- preneurial technology finance that is based on the idea of "bootstrapping." Bootstrap finance is a third approach (emphasizing funding technology ventures through revenue and other non-traditional sources), alongside the orthodoxies of traditional business finance (emphasizing debt) and contemporary venture finance (emphasizing venture capital and public equity). The paper also reports the results of an original empirical study of entrepreneurial technology firms in the bioscience-related industries in the United States. The data from the study show that "unorthodox" bootstrap financing is actually the dominant kind of financing in those high technology industries. The data are analyzed to explore industry effects, regional milieux effects, and entrepreneurial-status effects on the relative mix of bootstrap finance and the three traditional sources of finance: venture capital, public equity and debt finance. The effects on firm behavior and performance of variations in financing strategy are explored, with implications for managers of entrepreneurial technology ventures and educators concerned with technology entrepreneurship.

Suggested Citation

  • Kelvin W. Willoughby, 2008. "How Do Entrepreneurial Technology Firms Really Get Financed, And What Difference Does It Make?," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-28.
    • Handle: RePEc:wsi:ijitmx:v:05:y:2008:i:01:n:s0219877008001266
    DOI: 10.1142/S0219877008001266
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    References listed on IDEAS

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    1. Neil C. Churchill & John R. Thorne, 1989. "Alternative Financing for Entrepreneurial Ventures," Entrepreneurship Theory and Practice, , vol. 13(3), pages 7-9, April.
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    Cited by:

    1. Umeair Shahzad & Jing Liu & Faisal Mahmood & Fukai Luo, 2021. "Corporate innovation and trade credit demand: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1591-1606, September.
    2. MariaLaura Di Domenico & Helen Haugh & Paul Tracey, 2010. "Social Bricolage: Theorizing Social Value Creation in Social Enterprises," Entrepreneurship Theory and Practice, , vol. 34(4), pages 681-703, July.

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