University of Cincinnati Lindner College of Business

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How does start-up financing influence start-up speed? Evidence from the panel of entrepreneurship dynamics

Author(s): Charles Matthews, Paul Reynolds

Status: Published
Year: 2016
Publication Name: Small Business Economics, Springer
Volume: 46, Issue: 1, Page Number(s): 137-167


Why are some entrepreneurs able to start a new firm more quickly than others in the venture creation process? Drawing on pecking order and agency theory, this study investigates how start-up capital structure influences the time to either new firm founding or quitting the start-up process. The temporal aspect of the start-up process is one that is often discussed, but rarely studied. Therefore, we utilize competing risk and Cox regression event history analysis on a nationally representative sample of US entrepreneurs to investigate how start-up capital structure impacts the time in gestation to particular kinds of start-up outcomes. Our findings suggest that external equity has an appreciable impact on new firm emergence over time, and that the percentage of ownership held by the founders attenuates the benefits of external equity.


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