Does informal risk capital relax the financial constraints of high-tech entrepreneurial ventures?

Massimo G. Colombo, Annalisa Croce and Massimiliano Guerini

Applied Economics Letters, 2014, vol. 21, issue 5, 335-339

Abstract: This work analyses the effect of informal risk capital financing on a firm's investment/cash flow sensitivity (ICFS) in a sample of 498 Italian privately held high-tech entrepreneurial ventures (HTEVs) observed from 1996 to 2008. To detect financial constraints, we resort to an error correction model (ECM). We find that the receipt of informal risk capital in the seed stage results in reduced ICFS, indicating a persistent relaxation of financial constraints.

Date: 2014
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DOI: 10.1080/13504851.2013.859368

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