Anna Söderblom

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. 

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.