Start-Ups and External Equity: The Role of Entrepreneurial Experience
19 Pages Posted: 29 Mar 2010 Last revised: 29 Oct 2010
Date Written: March 9, 2010
Abstract
A long-standing problem for most business start-ups is acquiring external equity during the first year of operations. In explaining the financing decisions of business start-ups, Meyer’s (1984) pecking order theory serves as a logical working hypothesis. Treating the pecking order to be the resolution to an information problem about the potential profitability of a business start-up, this paper analyzes the determinants of obtaining external equity. Special consideration is given to the role of entrepreneurial experience. The results suggest that entrepreneurial experience impacts the extent to which key factors affect a start-up’s ability to obtain external equity.
Keywords: Start-ups, Entrepreneurship
JEL Classification: M13
Suggested Citation: Suggested Citation
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