Entrepreneurship, Sustainable Growth and Performance
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Entrepreneurship, Sustainable Growth and Performance

Frontiers in European Entrepreneurship Research

Edited by Hans Landström, Hans Crijns, Eddy Laveren and David Smallbone

This book provides an invaluable, state-of-the-art overview of current European research in the field of entrepreneurship. It focuses on four themes, each of which illustrates a key dimension in the overall theme: • entrepreneurs and their role in entrepreneurship • entrepreneurship in family businesses • performance of new ventures and • entrepreneurial processes.
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Chapter 5: Why Do They Use Financial Bootstrapping? A Quantitative Study of New Business Managers

Joakim Winborg


5. Why do they use financial bootstrapping? A quantitative study of new business managers Joakim Winborg INTRODUCTION In recent years empirical research has shown the importance of financial bootstrapping methods for the financing of new and small businesses (see, for example, Freear et al., 1995; Harrison and Mason, 1997; Winborg and Landström, 1997; 2001; Harrison et al., 2004; Van Auken, 2005). The study by Freear et al. (1995) was the first empirical study to examine the importance of financial bootstrapping for new businesses. Among other things, they found that, on average, the businesses examined managed to develop by means of bootstrapping and had no or only marginal long-term external finance, over a five-year period. A recent study by Neeley (2003) also demonstrates the important role played by financial bootstrapping, as a large percentage of the businesses examined used bootstrapping to some extent. Moreover, the findings presented by Winborg and Landström (2001) indicate a positive influence on profitability from using some kinds of financial bootstrapping methods. The first references to financial bootstrapping in the literature define it as methods for securing the use of resources without relying on long-term external finance (Freear et al., 1995). Winborg (2000) argues that, on the basis of this definition, bootstrapping methods can be divided into four categories: methods that eliminate the outflow of financial means, methods that minimize the outflow of financial means, methods that delay the outflow of financial means and, finally, methods that speed...

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