Abstract
Building upon prior research that demonstrates how the limited knowledge of finance alternatives of entrepreneurs may cause suboptimal finance decisions, this paper examines how entrepreneurs’ human and social capital influence their knowledge of finance alternatives. For this purpose, we use survey data from 103 Belgian start‐ups. Results demonstrate that entrepreneurs with a business education and entrepreneurs with experience in accountancy or finance have a broader knowledge of finance alternatives. Having a strong network in the financial community is further positively associated with the knowledge of finance alternatives. However, generic human capital, including higher education, industry experience, and management experience, is almost not related with the knowledge of finance alternatives.
Notes
1 The literature on experienced founders segments experienced founders into “portfolio” founders, that is, those who start ventures in a parallel fashion, and “serial” founders who start ventures sequentially (Alsos and Kolvereid Citation1998; Westhead, Ucbasaran, and Wright Citation2005; Westhead and Wright Citation1998; Wright, Robbie, and Ennew Citation1997). Though these authors document differences between types of experienced founders, following Hsu (Citation2007), we do not focus on the distinction between both types of entrepreneurs, as we are interested in contrasting experienced entrepreneurs with novice entrepreneurs. Furthermore, 30 percent of our respondents are experienced entrepreneurs, with the vast majority (90 percent) of them being portfolio entrepreneurs and only 10 percent of the experienced entrepreneurs being serial entrepreneurs. The limited number of serial entrepreneurs prevents us further from doing more refined statistical analyses.
2 Flanders is a region in Belgium.
3 We thank one of our reviewers for pointing out that the use of factor analysis may also have limitations. For instance, we lose more fine‐grained information on the individual finance alternatives. In order to test for the robustness of our findings, we also ran regressions using each individual finance alternative as a dependent variable. These additional regressions largely confirm the main conclusions drawn from using the broader groups of finance alternatives as identified by the factor analysis. These more fine‐grained analyses are available from the authors upon request.
4 We used targeted turnover after five years as an alternative proxy for the expected growth rate. Unfortunately, only 78 respondents filled in the targeted turnover after five years. The correlation between the targeted number of employees and the targeted turnover after five years is 0.348. Using this variable rather than the targeted number of employees leads to qualitatively similar results.
5 These additional tests are not reported due to space considerations but available from the authors upon simple request.
Additional information
Notes on contributors
Arnout Seghers
Arnout Seghers is Research and Teaching Assistant in the Department of Accounting and Corporate Finance at Ghent University, Gent, Belgium.
Sophie Manigart
Sophie Manigart is Full Professor at Vlerick Leuven Gent Management School and at Ghent University, Gent, Belgium.
Tom Vanacker
Tom Vanacker is Assistant Professor at Ghent University, Gent, Belgium.