Anna Söderblom

How new ventures are financed is a key issue for scholars and policymakers alike, as entrepreneurs’ preferences for and access to various types of funding have substantial implications for their survival, growth, and performance (Berger and Udell 1998; Cassar 2004; Manigart and Khosravi 2023). Capital structure concerns the combination of funding sources that a company uses to finance its operations, assets, and future growth. The capital structure of new firms is fundamentally different from those of established companies. Young, particularly innovative, firms have limited cash flow capacity and, therefore, must rely heavily on external sources to finance their ventures (Block et al. 2018).

While there is a growing body of research examining the labor market value for former entrepreneurs, the theoretical and empirical evidence so far provides surprisingly mixed conclusions. Building on signaling theory, we provide novel explanations for earnings differences among individuals who enter paid employment after periods of entrepreneurship. Based on a unique and homogenous sample of 213 Swedish former entrepreneurs, we test hypotheses concerning how various signals of human capital, individually and collectively, affect the former entrepreneurs’ wages as employees. We find that ex-entrepreneurs’ salary levels prior to their entrepreneurial endeavors and when longer time has passed since their last employment offer important signals of their general capabilities when returning to wage work. We also find that an individual who signals higher level of entrepreneurship-specific human capital through longer entrepreneurial experience or a proven capability to grow a venture receives higher wages than other ex-entrepreneurs. Moreover, we document that third-party endorsement emanating from the receipt of government subsidies results in higher salaries. Most importantly, we find that signals of stronger general capabilities, represented by higher wages prior to being an entrepreneur, are magnified by successful entrepreneurship and by endorsements from external fund providers. These findings are consistent with the signaling literature arguing that complementary signals are particularly useful to reducing uncertainty in noisy environments, such as situations when employing ex-entrepreneurs.

We explore new ventures’ capital structures, providing novel theoretical reasoning concerning path dependence. We examine a longitudinal sample of 1,756 Swedish startups and their use of external financing. We find support for path dependence in new ventures’ financial structures in that their early funding choices of subsidies, debt or equity, persist over time, with the strongest path effect for equity. In line with theory, those ventures who replace their CEO are more likely to change capital structures. Our study adds to the stream of research providing alternative explanations to prevailing theories of the evolution of new ventures’ financing structures. 

Change can be challenging!

This applies equally whether you are leading a change process, or you are a member of an organization seeking to navigate new changes. This book is about a model - the Y model - a powerful tool for bringing about successful change by giving structure and focus to change processes. The Y model helps you manage change projects, no matter what role you have in the process.

Over the years, the Y model has proven to be very useful to many managers working through change projects in their organization. That is why the Y model features prominently when scholars at the Stockholm School of Economics coach students in Executive MBA and other academic programs. This book describes the Y model and demonstrates how people apply it in organizations when leading change projects.

We open up the black box of business angel risk mitigation within investments, exploring triggers that force angels to shift strategies to overcome performance and relationship risks. Primary data were collected from 32 interviews with four matched business angel–entrepreneur dyads. Extensive iterative theory and cross-case comparisons reveal that business angels often shift strategies over the course of an investment cycle due to internal or external context-specific triggers, rather than factors associated with a particular investor, entrepreneur, or investment-related characteristic. Moreover, entrepreneur responses significantly impact business angels’ subsequent risk mitigation strategies. Two triggers emerging particularly strongly from the data were: (i) a shift in the angel’s perception of the entrepreneur’s ability and (ii) the entrance of new investors. We theorize on these findings and derive four novel propositions.

This paper examines the outcome additionality of prestigious early-stage government subsidies. Drawing on arguments from liabilities of newness and certification literatures we develop a mediated model that unpacks the outcome additionality of the subsidy. We hypothesize that subsidized new ventures attract more human and financial capital than their non-subsidized counterparts because the association with a prestigious government organization signals legitimacy of the new venture. Such legitimacy is crucial for attracting qualified employees and financiers. The effect of the access to human and financial capital, in turn, has long-term and substantial influence on performance, whereas the effect of the subsidy itself is marginal and short-lived. Applying a novel matching approach, we compare 130 approved applicants of a prestigious government subsidy with a control group of 154 applications rejected at the very last stage, thereby overcoming some of the selection and endogeneity biases associated with similar studies. The hypothesized model receives strong support by the data. These findings have several implications for government support of new ventures as well as scholars in the field.

We explore whether business angels shift strategies within single investments in order to overcome relationship risks associated with investing in young private ventures. And, if so, what triggers such shifts. Primary data were collected from 32 interviews with four matched business angel-entrepreneur dyads. Extensive iterative theory and cross-case comparisons reveal that risk mitigation strategies consist of a mix of various degrees of direct, indirect and trust- based control mechanisms, which change over time within investments due to context-specific triggers. Two triggers emerging particularly strong from the data were (i) a shift of the angel's perception of the entrepreneur's ability, and (ii) the entrance of new investors. We theorize on these findings and derive seven novel propositions.

Business angel (BA) investing is associated with various types of risks, where relationship risk often is highlighted as being especially critical (Fiet, 1995). Three investor strategies for mitigating relationship risks associated with BA investing in young private firms can be traced in the literature: (i) indirect control through monitoring and rewarding/punishing entrepreneur behavior and output, (ii) direct control through active involvement, and (iii) relying on mutual trust (Van Osnabrugge and Robinson, 2000; Maxwell and Lévesque, 2011). While early research in the field adopted a rather static view on BA categorization (Coveney and Moore, 1998; Sørheim and Landström, 2001), more contemporary research shows that BAs change investment roles across investments (Avdeitchikova, 2008; Lahti, 2011). However, whether BAs behave differently regarding risk mitigation within investments is less explored. This explorative study contributes to the opening of the black box of how BAs may shift risk mitigation strategies over time within single investments.