IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v45y2021i2p319-349.html

Path Dependence in New Ventures’ Capital Structures

Author

Listed:
  • Mikael Samuelsson
  • Anna Söderblom
  • Alexander McKelvie

Abstract

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.

Suggested Citation

  • Mikael Samuelsson & Anna Söderblom & Alexander McKelvie, 2021. "Path Dependence in New Ventures’ Capital Structures," Entrepreneurship Theory and Practice, , vol. 45(2), pages 319-349, March.
    • Handle: RePEc:sae:entthe:v:45:y:2021:i:2:p:319-349
    DOI: 10.1177/1042258720901717
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1042258720901717
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1042258720901717?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mary Tripsas & Giovanni Gavetti, 2000. "Capabilities, cognition, and inertia: evidence from digital imaging," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1147-1161, October.
    2. Pollock, Timothy G. & Chen, Guoli & Jackson, Eric M. & Hambrick, Donald C., 2010. "How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms," Journal of Business Venturing, Elsevier, vol. 25(1), pages 6-23, January.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    5. Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. "On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-878, July.
    6. Maria Minniti & William Bygrave, 2001. "A Dynamic Model of Entrepreneurial Learning," Entrepreneurship Theory and Practice, , vol. 25(3), pages 5-16, April.
    7. Miguel Meuleman & Mike Wright & Sophie Manigart & Andy Lockett, 2009. "Private Equity Syndication: Agency Costs, Reputation and Collaboration," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 616-644, June.
    8. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    9. Hirsch, Julia & Walz, Uwe, 2019. "The financing dynamics of newly founded firms," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 261-272.
    10. Jonathan T. Eckhardt & Scott Shane & Frédéric Delmar, 2006. "Multistage Selection and the Financing of New Ventures," Management Science, INFORMS, vol. 52(2), pages 220-232, February.
    11. Diana M. Hechavarría & Charles H. Matthews & Paul D. Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    12. Baron, James N & Burton, M Diane & Hannan, Michael T, 1999. "Engineering Bureaucracy: The Genesis of Formal Policies, Positions, and Structures in High-Technology Firms," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 1-41, April.
    13. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    14. Burgelman, Robert A., 2002. "Strategy as Vector and the Inertia of Co-evolutionary Lock-in," Research Papers 1745, Stanford University, Graduate School of Business.
    15. Hsu, David H., 2007. "Experienced entrepreneurial founders, organizational capital, and venture capital funding," Research Policy, Elsevier, vol. 36(5), pages 722-741, June.
    16. Julia Hirsch & Uwe Walz, 2011. "Financing Decisions along a Firm’s Life†cycle: Debt as a Commitment Device," European Financial Management, European Financial Management Association, vol. 17(5), pages 898-927, November.
    17. Francisco Sogorb-Mira, 2005. "How SME Uniqueness Affects Capital Structure: Evidence From A 1994–1998 Spanish Data Panel," Small Business Economics, Springer, vol. 25(5), pages 447-457, December.
    18. Hanssens, Jürgen & Deloof, Marc & Vanacker, Tom, 2016. "The evolution of debt policies: New evidence from business startups," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 120-133.
    19. Miguel Meuleman & Mike Wright & Sophie Manigart & Andy Lockett, 2009. "Private Equity Syndication: Agency Costs, Reputation and Collaboration," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5-6), pages 616-644.
    20. Rebel A. Cole, 2013. "What Do We Know about the Capital Structure of Privately Held US Firms? Evidence from the Surveys of Small Business Finance," Financial Management, Financial Management Association International, vol. 42(4), pages 777-813, December.
    21. repec:bla:jfinan:v:59:y:2004:i:4:p:1805-1844 is not listed on IDEAS
    22. Cassar, Gavin, 2004. "The financing of business start-ups," Journal of Business Venturing, Elsevier, vol. 19(2), pages 261-283, March.
    23. Samina Karim & Will Mitchell, 2000. "Path‐dependent and path‐breaking change: reconfiguring business resources following acquisitions in the U.S. medical sector, 1978–1995," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1061-1081, October.
    24. Dutta, Dev K. & Malhotra, Shavin & Zhu, PengCheng, 2016. "Internationalization process, impact of slack resources, and role of the CEO: The duality of structure and agency in evolution of cross-border acquisition decisions," Journal of World Business, Elsevier, vol. 51(2), pages 212-225.
    25. Joern H. Block & Massimo G. Colombo & Douglas J. Cumming & Silvio Vismara, 2018. "New players in entrepreneurial finance and why they are there," Small Business Economics, Springer, vol. 50(2), pages 239-250, February.
    26. Tommaso Minola & Marco Giorgino, 2011. "External capital for NTBFs: the role of bank and venture capital," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 14(2/3), pages 222-247.
    27. Malte Brettel, 2003. "Business angels in Germany: A research note," Venture Capital, Taylor & Francis Journals, vol. 5(3), pages 251-268.
    28. Joern H. Block & Douglas J. Cumming & Silvio Vismara, 2017. "International perspectives on venture capital and bank finance for entrepreneurial firms," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 3-22, March.
    29. Michaelas, Nicos & Chittenden, Francis & Poutziouris, Panikkos, 1999. "Financial Policy and Capital Structure Choice in U.K. SMEs: Empirical Evidence from Company Panel Data," Small Business Economics, Springer, vol. 12(2), pages 113-130, March.
    30. Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
    31. Rodolphe Durand & Jean-Philippe Vergne, 2011. "The Path of Most Persistence: An Evolutionary Perspective on Path Dependence and Dynamic Capabilities," Post-Print hal-00583118, HAL.
    32. Söderblom, Anna & Samuelsson, Mikael & Wiklund, Johan & Sandberg, Rickard, 2015. "Inside the black box of outcome additionality: Effects of early-stage government subsidies on resource accumulation and new venture performance," Research Policy, Elsevier, vol. 44(8), pages 1501-1512.
    33. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," The Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-984.
    34. Julie M. Hite & William S. Hesterly, 2001. "The evolution of firm networks: from emergence to early growth of the firm," Strategic Management Journal, Wiley Blackwell, vol. 22(3), pages 275-286, March.
    35. Arnout Seghers & Sophie Manigart & Tom Vanacker, 2012. "The Impact of Human and Social Capital on Entrepreneurs’ Knowledge of Finance Alternatives," Journal of Small Business Management, Taylor & Francis Journals, vol. 50(1), pages 63-86, January.
    36. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    37. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 281-292.
    38. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early‐Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    39. Robert E. Carpenter & Bruce C. Petersen, 2002. "Is The Growth Of Small Firms Constrained By Internal Finance?," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 298-309, May.
    40. Christine M. Beckman & M. Diane Burton, 2008. "Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO," Organization Science, INFORMS, vol. 19(1), pages 3-24, February.
    41. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    42. Diamanto Politis, 2005. "The Process of Entrepreneurial Learning: A Conceptual Framework," Entrepreneurship Theory and Practice, , vol. 29(4), pages 399-424, July.
    43. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
    44. Susan Coleman & Alicia Robb, 2012. "Capital structure theory and new technology firms: is there a match?," Management Research Review, Emerald Group Publishing Limited, vol. 35(2), pages 106-120, January.
    45. Susan Coleman & Alicia Robb, 2012. "Capital structure theory and new technology firms: is there a match?," Management Research Review, Emerald Group Publishing Limited, vol. 35(2), pages 106-120, January.
    46. Hogan, Teresa & Hutson, Elaine, 2005. "Capital structure in new technology-based firms: Evidence from the Irish software sector," Global Finance Journal, Elsevier, vol. 15(3), pages 369-387, February.
    47. Howorth, Carole & Peel, Michael J & Wilson, Nicholas, 2003. "An Examination of the Factors Associated with Bank Switching in the U.K. Small Firm Sector," Small Business Economics, Springer, vol. 20(4), pages 305-317, June.
    48. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
    49. Scott Shane & Toby Stuart, 2002. "Organizational Endowments and the Performance of University Start-ups," Management Science, INFORMS, vol. 48(1), pages 154-170, January.
    50. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    51. Kraus, Alan & Litzenberger, Robert H, 1973. "A State-Preference Model of Optimal Financial Leverage," Journal of Finance, American Finance Association, vol. 28(4), pages 911-922, September.
    52. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    53. Mike Wright & Paul Westhead & Jeff Sohl, 1998. "Editors’ Introduction: Habitual Entrepreneurs and Angel Investors," Entrepreneurship Theory and Practice, , vol. 22(4), pages 5-22, July.
    54. Autio, Erkko & Rannikko, Heikki, 2016. "Retaining winners: Can policy boost high-growth entrepreneurship?," Research Policy, Elsevier, vol. 45(1), pages 42-55.
    55. Tom Vanacker & Sophie Manigart, 2010. "Pecking order and debt capacity considerations for high-growth companies seeking financing," Small Business Economics, Springer, vol. 35(1), pages 53-69, July.
    56. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, vol. 72(3), pages 285-318, July.
    57. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early-Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    58. Stephan Manning & Jörg Sydow, 2011. "Projects, paths, and practices: sustaining and leveraging project-based relationships," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(5), pages 1369-1402, October.
    59. Scott Shane, 2000. "Prior Knowledge and the Discovery of Entrepreneurial Opportunities," Organization Science, INFORMS, vol. 11(4), pages 448-469, August.
    60. Diane M. Sullivan & Cameron M. Ford, 2014. "How Entrepreneurs use Networks to Address Changing Resource Requirements during Early Venture Development," Entrepreneurship Theory and Practice, , vol. 38(3), pages 551-574, May.
    61. de Bettignies, Jean-Etienne & Brander, James A., 2007. "Financing entrepreneurship: Bank finance versus venture capital," Journal of Business Venturing, Elsevier, vol. 22(6), pages 808-832, November.
    62. Michael L. Lemmon & Michael R. Roberts & Jaime F. Zender, 2008. "Back to the Beginning: Persistence and the Cross‐Section of Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 63(4), pages 1575-1608, August.
    63. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    64. Marie-Laure Salles-Djelic & Sigrid Quack, 2007. "Overcoming path dependency: path generation in open systems," Post-Print hal-01891993, HAL.
    65. Jean‐Philippe Vergne & Rodolphe Durand, 2010. "The Missing Link Between the Theory and Empirics of Path Dependence: Conceptual Clarification, Testability Issue, and Methodological Implications," Journal of Management Studies, Wiley Blackwell, vol. 47(4), pages 736-759, June.
    66. Siqueira, Ana Cristina O. & Guenster, Nadja & Vanacker, Tom & Crucke, Saskia, 2018. "A longitudinal comparison of capital structure between young for-profit social and commercial enterprises," Journal of Business Venturing, Elsevier, vol. 33(2), pages 225-240.
    67. Jing Zhang & Vangelis Souitaris & Pek–hooi Soh & Poh–kam Wong, 2008. "A Contingent Model of Network Utilization in Early Financing of Technology Ventures," Entrepreneurship Theory and Practice, , vol. 32(4), pages 593-613, July.
    68. Alicia M. Robb & David T. Robinson, 2014. "The Capital Structure Decisions of New Firms," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 153-179, January.
    69. Colin Mason & Tiago Botelho & Richard Harrison, 2019. "The changing nature of angel investing: some research implications," Venture Capital, Taylor & Francis Journals, vol. 21(2-3), pages 177-194, July.
    70. Steven Klepper & Kenneth L. Simons, 2000. "Dominance by birthright: entry of prior radio producers and competitive ramifications in the U.S. television receiver industry," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 997-1016, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zahlan, Ahmed, 2025. "Strategic resource mobilization for AI entrepreneurship in healthcare: Qualitative insights from startup founders," Technovation, Elsevier, vol. 145(C).
    2. Cao, Fuguo & Yang, Yusen & Guo, Shaobo & Appolloni, Andrea, 2025. "Towards an optimal effect of government technology innovation policy mix: the case of government procurement and research and development subsidies with evidence from China," Socio-Economic Planning Sciences, Elsevier, vol. 100(C).
    3. McSweeney, Jordan J. & McSweeney, Kevin T. & Allison, Thomas H. & Anglin, Aaron H., 2025. "The entrepreneurial pitching process: A systematic review using topic modeling and future research agenda," Journal of Business Venturing, Elsevier, vol. 40(5).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Siqueira, Ana Cristina O. & Guenster, Nadja & Vanacker, Tom & Crucke, Saskia, 2018. "A longitudinal comparison of capital structure between young for-profit social and commercial enterprises," Journal of Business Venturing, Elsevier, vol. 33(2), pages 225-240.
    2. Sardo, Filipe & Serrasqueiro, Zélia & Armada, Manuel Rocha, 2022. "The importance of owner loans for rebalancing the capital structure of small knowledge-intensive service firms," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. Walthoff-Borm, Xavier & Schwienbacher, Armin & Vanacker, Tom, 2018. "Equity crowdfunding: First resort or last resort?," Journal of Business Venturing, Elsevier, vol. 33(4), pages 513-533.
    4. Bhattacharyya, Jagriti & Subrahmanya, M.H. Bala, 2024. "Determinants of a digital start-up's access to VC financing in India: A signaling theory perspective," Technological Forecasting and Social Change, Elsevier, vol. 207(C).
    5. Ana Venâncio & João Jorge, 2022. "The role of accelerator programmes on the capital structure of start-ups," Small Business Economics, Springer, vol. 59(3), pages 1143-1167, October.
    6. Vaznyte, Egle & Andries, Petra, 2019. "Entrepreneurial orientation and start-ups' external financing," Journal of Business Venturing, Elsevier, vol. 34(3), pages 439-458.
    7. Cumming, Douglas & Deloof, Marc & Manigart, Sophie & Wright, Mike, 2019. "New directions in entrepreneurial finance," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 252-260.
    8. Hirsch, Julia & Walz, Uwe, 2019. "The financing dynamics of newly founded firms," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 261-272.
    9. Mateev, Miroslav & Poutziouris, Panikkos & Ivanov, Konstantin, 2013. "On the determinants of SME capital structure in Central and Eastern Europe: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 27(1), pages 28-51.
    10. Tom Vanacker & Sophie Manigart, 2010. "Pecking order and debt capacity considerations for high-growth companies seeking financing," Small Business Economics, Springer, vol. 35(1), pages 53-69, July.
    11. Van Campenhout, Geert & Van Caneghem, Tom, 2009. "Information Availability, Information Quality and the Financial Structure of Belgian SME's," Working Papers 2009/27, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    12. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 573-648, Elsevier.
    13. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    14. Massimo Colombo & Luca Grilli, 2007. "Funding Gaps? Access To Bank Loans By High-Tech Start-Ups," Small Business Economics, Springer, vol. 29(1), pages 25-46, June.
    15. Neville, Conor & Lucey, Brian M., 2022. "Financing Irish high-tech SMEs: The analysis of capital structure," International Review of Financial Analysis, Elsevier, vol. 83(C).
    16. Daniel Blaseg & Douglas Cumming & Michael Koetter, 2021. "Equity Crowdfunding: High-Quality or Low-Quality Entrepreneurs?," Entrepreneurship Theory and Practice, , vol. 45(3), pages 505-530, May.
    17. Tom Caneghem & Geert Campenhout, 2012. "Quantity and quality of information and SME financial structure," Small Business Economics, Springer, vol. 39(2), pages 341-358, September.
    18. Maarten Cerpentier & Tom Vanacker & Ine Paeleman & Katja Bringmann, 2022. "Equity crowdfunding, market timing, and firm capital structure," The Journal of Technology Transfer, Springer, vol. 47(6), pages 1766-1793, December.
    19. Diana M. Hechavarría & Charles H. Matthews & Paul D. Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    20. Magnus Schückes & Tobias Gutmann, 2021. "Why do startups pursue initial coin offerings (ICOs)? The role of economic drivers and social identity on funding choice," Small Business Economics, Springer, vol. 57(2), pages 1027-1052, August.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:entthe:v:45:y:2021:i:2:p:319-349. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.