Entrepreneurship, Sustainable Growth and Performance Frontiers in European Entrepreneurship Research
Frontiers in European Entrepreneurship Research
Edited by Hans Landström, Hans Crijns, Eddy Laveren and David Smallbone
Chapter 5: Why Do They Use Financial Bootstrapping? A Quantitative Study of New Business Managers
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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