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High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?

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In this paper, we study the demand of high-tech entrepreneurial ventures for external equity, revealing the conditions that determine whether, when and where they decide to seek external equity during their lives. We also provide evidence on the most important reasons for not looking for external equity at all. We focus on a sample of 530 high-tech entrepreneurial ventures located in 7 European countries and founded between 1984 and 2009. We reveal that company-level characteristics, namely the human capital, the innovativeness, the size, the asset intangibility, and the alternatives to equity capital (internal cash flows and debt) determine whether, when (i.e., at what age) and when (i.e., in international or domestic markets) companies seek external equity. Industry- and country-level variables also play a secondary role in explaining high-tech entrepreneurial ventures’ demand for external equity.

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  1. It is worth emphasizing that this issue has also relevant policy implication, especially in Europe. The European Commission has taken several steps to overcome the national barriers to cross-border investment flows, most notably through the introduction of the VC passport (European Commission 2007).

  2. The distribution of survey respondents with respect to survey recipients is similar across foundation periods (χ2(4) = 4.061) but significantly different across countries (χ2(6) = 252.04) and industries (χ2(6) = 14.052). These differences may result in a response bias, which we take in consideration in the robustness check section of the paper.

  3. To reduce retrospective bias and to increase response rates, we decided not to inquire about ventures' seeking behavior on a year-by-year basis. Instead, we collected information on ventures’ external equity-seeking behavior in 5 periods of their early life, which was relatively easy for respondent to identify and remember.

  4. Despite the smaller sample, results are similar when we do not impute missing values in human capital and accounting variables to 0, and are available from the authors upon request.

  5. On the other hand, hybrid quasi-equity forms of public intervention are also easing companies’ access to debt markets (see, e.g., Martí and Quas 2018).


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We acknowledge support from the 7th EU Framework Programme VICO project on “Financing Entrepreneurial Ventures in Europe: Impact on Innovation, Employment Growth, and Competitiveness” (Contract no. SSH-2007-1.2.3-G.A. 217485).

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Correspondence to Anita Quas.

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Quas, A., D’Adda, D. High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?. Econ Polit Ind 45, 311–334 (2018).

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