Hi-tech start-ups: legitimacy challenges and funding dynamics

ABSTRACT

Studies on the legitimacy challenges faced by hi-tech start-ups are still scarce, leaving room for research, and policymaking debate. Legitimacy issues may become difficult to face for hi-tech firms in comparison with other start-ups, because they work in an extreme environment where the technological challenges are at the edge of the scientific possibility. The paper proposes a conceptual model to grasp the relevance of three legitimacy drivers of the hi-tech start-ups for investment decisions. We investigated the ability of 30 hi-tech start-up firms to obtain financial resources from the US investors, employing a set-theoretic approach and carried out fuzzy-set Qualitative Comparative Analysis. Our findings clarify that the funding decisions of US investors are driven by the location of headquarter and R&D of hi-tech start-ups and by the educational experience of the founders. Our study has significant theoretical, practical, and policymaking implications.

KEYWORDS:

• Entrepreneurship
• funding
• legitimacy
• hi-tech start-ups

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Nadia Di Paola is Assistant Professor of Management. Her research focuses on entrepreneurship and technology venturing.

Rosanna Spanò is Assistant Professor of Accounting. Her research focuses on accounting and management accounting.

Adele Caldarelli is Professor of Accounting. Her research focuses on accounting and management accounting.

Roberto Vona is Professor of Management. His focuses on entrepreneurship and technology venturing.

ORCID

Rosanna Spanò http://orcid.org/0000-0003-0557-3011

Notes

1 We define hi-tech start-ups as new firms (3–5 years) which use or invest in rapidly emerging or evolving technology as a key part of their product development, production, or marketing strategy (Park 2005).