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The role of trust and social commitment in start-up financing

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  • Fernandez, Viviana

Abstract

Access to finance is a perennial problem for business start-ups. This article advances the extant literature on the determinants of entrepreneurial finance by presenting a comprehensive analysis of the amount needed to start a business, the amount of self-investment and the number of external sources of financing utilized. Based on information from the Global Entrepreneurship Monitor 2015, the empirical analysis shows that the availability of external sources of financing depend primarily on demographics, entrepreneurial experience, business features, e.g., export propensity and growth potential; and, on the phase of economic development. Furthermore, relatively high levels of social trust may increase the likelihood of obtaining external financing. The novelty of the product/service offered, financial barriers and investor/property rights protection in turn may also explain the proportion of self-investment provided to a new business. An analysis of financing options of socially-oriented businesses shows that they are more successful in obtaining financial support from private investors/venture capitalists and governments.

Suggested Citation

  • Fernandez, Viviana, 2021. "The role of trust and social commitment in start-up financing," International Review of Financial Analysis, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finana:v:75:y:2021:i:c:s105752192100065x
    DOI: 10.1016/j.irfa.2021.101722
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    Cited by:

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    3. Lin, Boqiang & Li, Minyang, 2023. "Emerging Industry Development and Information Transmission in Financial Markets: Evidence from China's Renewable Energy," Energy Economics, Elsevier, vol. 128(C).
    4. Zhu, Bo & Wang, Yansen, 2024. "Does social trust affect firms' ESG performance?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    5. Fernandez, Viviana, 2021. "Are extractive ventures more socio-environmentally committed?," Resources Policy, Elsevier, vol. 74(C).
    6. Fernandez, Viviana, 2024. "Micro-angel investments of men and women: The role of institutions," Research in International Business and Finance, Elsevier, vol. 70(PB).
    7. Wellalage, Nirosha Hewa & Fernandez, Viviana & Bui, Trang, 2023. "Immigration and entrepreneurship: Is there a uniform relationship across countries?," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 270-285.
    8. Fernandez, Viviana, 2023. "Family entrepreneurship around the world," International Review of Financial Analysis, Elsevier, vol. 89(C).
    9. Nilba Feijó-Cuenca & Nuria Ceular-Villamandos & Virginia Navajas-Romero, 2023. "Behavioral Patterns That Influence the Financing Choice Models of Small Enterprises in Ecuador through Latent Class Analysis," Sustainability, MDPI, vol. 15(8), pages 1-17, April.
    10. Shi, Lisi & Ho, Kung-Cheng & Liu, Ming-Yu, 2023. "Does societal trust make managers more trustworthy?," International Review of Financial Analysis, Elsevier, vol. 86(C).

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    More about this item

    Keywords

    Entrepreneurial finance; Social trust; Social entrepreneurship; Gender; Global entrepreneurship monitor;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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