Financial Signalling by Innovative Nascent Entrepreneurs

David Audretsch (), Bönte, Werner and Prashanth Mahagaonkar
Authors registered in the RePEc Author Service: Werner Bönte ()

No 7165, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Innovative new ventures fail if they cannot attract resources needed to commercialise new ideas and inventions. Obtaining external resources is a central issue for nascent entrepreneurs - people who are in the process of starting new ventures. We argue in this paper that, a way to deal with this problem is to signal appropriability and feasibility of innovation to the financiers through patenting and prototyping activities, right in the early stages of the venture. We build a new dataset of over 900 nascent entrepreneurs with information on financing from conventional sources as well as business angels and venture capitalists. Our results suggest that patenting and prototyping increase the likelihood of obtaining external finance, especially equity. However, the most important determinant of debt is house ownership. This indicates that new start-ups need to protect their innovations and at the same time, should also prototype the intended product in order to obtain start-up finance. New ventures should therefore strategically use their innovativeness in order to obtain external finance.

Keywords: Innovation; entrepreneurship; Finance; Information asymmetries (search for similar items in EconPapers)
JEL-codes: G14 G24 G32 L26 M13 O34 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-cfn, nep-cta and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP7165 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Financial Signaling 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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7165

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7165

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().