Use of financial bootstrapping in new businesses: a question of last resort?

Research output: Contribution to journalArticle

Abstract

This study examines motives for using financial bootstrapping in new businesses. First, it identifies and labels groups of new business founders based on their motives for using bootstrapping. Second, it examines the relation between variables referring to the founder and the business and the motives. The data were collected in a questionnaire sent by post to 120 new business founders in Swedish business incubators. The results show that ‘lower costs’ is the most important motive, followed by ‘lack of capital’, and, surprisingly, ‘fun helping others and getting help from others’. On the basis of a cluster analysis three groups of founders were identified, based on differences in their motives for using bootstrapping. The groups were labeled cost-reducing bootstrappers, capital-constrained bootstrappers and risk-reducing bootstrappers. The relative experience of the founder is the most significant influence for using bootstrapping. As experience is gained the new business founder learns more about the advantages and motives for using bootstrapping. The resource acquisition behavior changes from initially focusing on reducing costs towards a proactive focus on reducing the risk in the business.

Details

Authors
External organisations
  • External Organization - Unknown
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Business Administration

Keywords

  • financial bootstrapping, motives, new businesses, business incubators, quantitative study
Original languageEnglish
Pages (from-to)71-83
JournalVenture Capital: An International Journal of Entrepreneurial Finance
Volume11
Issue number1
Publication statusPublished - 2009
Publication categoryResearch
Peer-reviewedYes
Externally publishedYes