Financing Complexity and Sophistication in Nascent Ventures
AbstractAlthough scholars have considered the financing challenges facing small businesses for some time, little work has focused on financing issues at the venture's nascent stage. In this study, we investigate the sources of funding sought by nascent entrepreneurs and the relationship between the complexity of these funding sources, business plan formalization, and expectations of future firm growth. Using data from the Entrepreneurship Research Consortium/Panel Study of Entrepreneurial Dynamics, we find that nascent entrepreneurs, even those associated with high-growth ventures, favor simple rather than complex sources of funding at the nascent stage. Funding complexity and business plan formalization are also found related to expectation of firm growth. An additional contribution is the development of a funding complexity continuum scale, which should be useful in future studies of nascent as well as later stage entrepreneurial finance and firm growth.
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