Financial Signaling by Innovative Nascent Entrepreneurs

David B. Audretsch, Prashanth Mahagaonkar () and Werner Bönte ()
Additional contact information
David B. Audretsch: Indiana University and Max Planck Institute of Economics

No sdp09001, Schumpeter Discussion Papers from Universitätsbibliothek Wuppertal, University Library

Abstract: External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project's feasibility. Our analysis of 900 nascent entrepreneurs finds that patents and prototypes increase the likelihood of obtaining equity finance. Thus, if signals are credible, innovation positively impacts external financing. Interestingly, entrepreneurs in planning versus early start-up stage portray different signaling effects, indicating that the relation between finance and innovation depends on the stage of a start-up lifecycle.

Keywords: Innovation; Entrepreneurship; Finance; Information Asymmetries (search for similar items in EconPapers)
JEL-codes: L26 M13 G14 G24 G32 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-ipr
Date: 2009-01

Downloads: (external link)
http://elpub.bib.uni-wuppertal.de/edocs/dokumente/ ... p/sdp09/sdp09001.pdf (application/pdf)

Related works:
Working Paper: Financial Signalling by Innovative Nascent Entrepreneurs (2009)
Working Paper: Financial Signaling by Innovative Nascent Entrepreneurs (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bwu:schdps:sdp09001

Access Statistics for this paper

More papers in Schumpeter Discussion Papers from Universitätsbibliothek Wuppertal, University Library
Series data maintained by Frank Hoffmann ().