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Financial Signaling by Innovative Nascent Entrepreneurs

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Author Info

  • David B. Audretsch

    (Indiana University and Max Planck Institute of Economics)

  • Prashanth Mahagaonkar

    (Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group)

  • Werner Bönte

    ()
    (Schumpeter School of Economics and Business, Bergische Universität Wuppertal and Max Planck Institute of Economics)

Abstract

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project's feasibility. Our analysis of 900 nascent entrepreneurs finds that patents and prototypes increase the likelihood of obtaining equity finance. Thus, if signals are credible, innovation positively impacts external financing. Interestingly, entrepreneurs in planning versus early start-up stage portray different signaling effects, indicating that the relation between finance and innovation depends on the stage of a start-up lifecycle.

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Bibliographic Info

Paper provided by Universitätsbibliothek Wuppertal, University Library in its series Schumpeter Discussion Papers with number sdp09001.

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Length: 45
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:bwu:schdps:sdp09001

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Web page: http://elpub.bib.uni-wuppertal.de

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Keywords: Innovation; Entrepreneurship; Finance; Information Asymmetries;

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Citations

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Cited by:
  1. Filipe Silva & Carlos Carreira, 2012. "Financial Constraints: Do They Matter to R&D Subsidy Attribution?," GEMF Working Papers 2012-18, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. Rajeev Goel & Devrim Göktepe-Hultén, 2013. "Nascent entrepreneurship and inventive activity: a somewhat new perspective," The Journal of Technology Transfer, Springer, vol. 38(4), pages 471-485, August.
  3. Andrea Bellucci & Ilario Favaretto & Germana Giombini, 2014. "Does Innovation Affect Credit Access? New Empirical Evidence from Italian Small Business Lending," IAW Discussion Papers 104, Institut für Angewandte Wirtschaftsforschung (IAW).
  4. Llussá, Fernanda, 2009. "Financial Development, Gender and Entrepreneurship," MPRA Paper 26228, University Library of Munich, Germany.

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