The relationship between entrepreneurial finance and success of high tech young entrepreneurial firms focusing on funding and ownership structures
Farshad Eshraghi
The Claude Littner Business School
Supervisors:
Professor Javad Izadi
The Claude Littner Business School
Dr Amelia Au-Yeung
The Claude Littner Business School
This study explores the relationship between entrepreneurial finance and the growth and innovation rate of High Tech Young Entrepreneurial Firms (HTYEFs). It focuses on how different funding and ownership structures impact these firms’ success metrics. The central argument is that the mix of financing sources and ownership structures plays a pivotal role in determining their innovation capabilities and growth potential. Through a comprehensive literature review and quantitative research methods, the study examines the effects of various financing options - venture capital, angel investment, crowdfunding, and nascent financial instruments - on HTYEFs’ performance and innovation rates.
The research employs a primarily quantitative methodology, supplemented by qualitative approaches, within a conceptual framework that assesses the direct effects of funding structure on firm performance and innovation through the mediating role of ownership structure. This study identifies critical factors influencing HTYEFs’ success and highlights the potential conflicts and agency costs arising from heterogeneous investment types and sizes.
Based on a pilot study, findings indicate a significant relationship between diversified financing strategies and performance and similarly with innovation outcomes. Initial analysis on a small sample of companies revealed multifaceted outcomes, where certain anticipated correlations did not materialise while others emerged more strongly than expected. The findings notably underscore the complexities within the domain of entrepreneurial finance, especially in relation to the heterogeneity of external equity finance and the pivotal role of insider ownership.
The originality of this study lies in its comprehensive analysis of how varying financing and ownership structures affect key success metrics of HTYEFs, filling a gap in the current literature that often considers these factors in isolation. The research provides practical insights for entrepreneurs, investors, and policymakers on structuring financing to foster innovation and growth within the high-tech entrepreneurial ecosystem. Furthermore, this thesis enriches the academic discourse on entrepreneurial finance, paving the way for further investigations into the strategic deployment of financial resources in the high-tech sector.