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New insights on financing and business development of start-up firms and SMEs
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.). (Bank och finans)
2009 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis aspires to advance understanding of how start-up firms’ and small and medium sized firms’(SMEs) network relationships affect acquisition of financing and information necessary to achieve firmbusiness development through the exchange in business relationships. It contributes to research on socialstructure by clarifying how network relationships that facilitate exchange have a positive effect on firmbusiness development, defined as subjective and objective enhancement of firm performance.

The empirical setting consists of case studies in entrepreneurial start-up firms and of quantitative researchin SMEs. The findings show that in the start-up phase of firm development, network relationships that areembedded in social attachment and shared cognitive schemes constitute means to acquire informationcontaining referrals to new business partners, thus affecting the structural development of start-ups firms’business network. Findings further show that relationships to banks are important in order to fund thisstructural development. The thesis also shows the effects of banks, as institutional actors, on SMEs’investments in international business relationships and the effects of such investments on SMEs’ businessdevelopment. It is shown that relationships to domestic and local banks in different ways affect SMEs’specific investments in international business relationships. A local bank relationship decreases the SME’srelationship specific investments, while a domestic bank relationship increases relationship specificinvestments. There is however an indirect positive effect of a local bank relationship on the SME’srelationship specific investments, mediated by a positive effect of the SME’s relationships to other localinstitutional actors. The results further show that increases in relationship specific investments promoteSMEs’ business development. Findings made in this thesis also show that institutions, experiencedthrough interaction in the international business relationship, positively affect relationship specificinvestments and the performance enhancement of such investments. A general conclusion drawn fromthe findings presented in this thesis is the relevance of a type of actor - actors that facilitate exchangesamong firms and their business partners who are, or wish to be, independent - to the businessdevelopment of start-ups and SMEs.

This thesis challenges banks to increase cognitive alignment with customers of start-up firms and toconsider corporate customers in view of their business relationships and network structure. Theseapproaches are suggested to facilitate bank’s assessment of firm creditworthiness.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2009. , 60 p.
Series
TRITA/KTH/CEFIN-DT, ISSN 1654-9376 ; 2009:02
Keyword [en]
start-ups, SMEs, banks, financing, information, business development, social structure, net work relationships
National Category
Production Engineering, Human Work Science and Ergonomics
Identifiers
URN: urn:nbn:se:kth:diva-11009ISBN: 978-91-976270-7-8 (print)OAI: oai:DiVA.org:kth-11009DiVA: diva2:234295
Public defence
2009-09-11, Sal F3, Lindstedtsvägen 26, KTH, Stockholm, 10:00 (English)
Opponent
Supervisors
Note

QC 20100722

Available from: 2009-09-09 Created: 2009-09-07 Last updated: 2013-11-11Bibliographically approved
List of papers
1. The potential role of start-up referral ties in the evolution of entrepreneurial networks in the start-up phase
Open this publication in new window or tab >>The potential role of start-up referral ties in the evolution of entrepreneurial networks in the start-up phase
(English)In: Organization Studies, ISSN 0170-8406, E-ISSN 1741-3044Article in journal (Other academic) Submitted
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-14167 (URN)
Note
QS 20120327Available from: 2010-07-22 Created: 2010-07-22 Last updated: 2017-12-12Bibliographically approved
2. Social capital and firm financing: a multidimensional approach
Open this publication in new window or tab >>Social capital and firm financing: a multidimensional approach
2009 (English)In: Entrepreneurship: Theory & Practice, ISSN 1042-2587, E-ISSN 1540-6520Article in journal (Other academic) Submitted
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-14168 (URN)
Note
QS 20120315Available from: 2010-07-22 Created: 2010-07-22 Last updated: 2017-12-12Bibliographically approved
3. Industry-embedded financial decision making: The case of a fashion firm
Open this publication in new window or tab >>Industry-embedded financial decision making: The case of a fashion firm
2008 (English)In: International Journal of Bank Marketing, ISSN 0265-2323, E-ISSN 1758-5937, Vol. 26, 42-56 p.Article in journal (Refereed) Published
Abstract [en]

Purpose - The purpose of this paper is to study organisational characteristics and formations that are important to the establishment of a strong embedded relationship between the small to medium-sized enterprise (SME) and the financier, which in turn influences the firm’s financial decision-making process. Design/methodology/approach - The study is conducted as a longitudinal, single case study of a fashion firm. The firm prefers equity to debt financing, thus constituting an interesting case of deviation from the pecking order theory of finance. The present paper investigates the rationale behind the firm’s financial decision making. Findings - The findings suggest that identity field embeddedness is relevant in the firm’s financial decision-making process because field identification facilitates the formation of embedded relationships between the SME and the financier. The notion of belonging to the same identity field as the supplier of equity finance, while experiencing a distance to the bank, motivates the firm to prefer the more costly equity financing to bank financing. The notion of perceived similarities with the investor seems to set expectations of access to private information. Research limitations/implications - Banks need to increase their knowledge about different industries and systematically process and store such knowledge to alleviate what SME customers may perceive as a distance to the bank. Banks could also increase their marketability to SMEs by acting as mediators to other organisations, such as industry organisations, authorities and consultants. Originality/value - The study contributes to the literature on how social relations affect SMEs’ financial decision making and the bank-firm relationship. © Emerald Group Publishing Limited.

Keyword
Banks; Decision making; Fashion industry; Financing; Small to medium-sized enterprises
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-14169 (URN)10.1108/02652320810847101 (DOI)2-s2.0-38749116958 (Scopus ID)
Note

QC 20100722

Available from: 2010-07-22 Created: 2010-07-22 Last updated: 2017-12-12Bibliographically approved
4. The effects of banks, as institutional actors, on investments in international business relationships and relationship performance
Open this publication in new window or tab >>The effects of banks, as institutional actors, on investments in international business relationships and relationship performance
(English)In: Journal of International Business Studies, ISSN 0047-2506, E-ISSN 1478-6990Article in journal (Other academic) Submitted
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-14172 (URN)
Note
QS 20120327Available from: 2010-07-22 Created: 2010-07-22 Last updated: 2017-12-12Bibliographically approved
5. The impact of institutional impediments and information and knowledge exchange on SMEs’ investments in international business relationships
Open this publication in new window or tab >>The impact of institutional impediments and information and knowledge exchange on SMEs’ investments in international business relationships
2010 (English)In: International Business Review, ISSN 0969-5931, E-ISSN 1873-6149, Vol. 19, no 6, 548-561 p.Article in journal (Refereed) Published
Abstract [en]

This paper investigates the impact of institutional impediments and of knowledge and information exchange in international business relationships on small and medium-sized enterprises (SMEs) specific investments in international business relationships and the outcome of such investments on the performance of SMEs. Using a sample of 255 internationalising SMEs, we develop and test three hypotheses with the linear structural relations (LISREL) model. The analysis shows that institutional impediments and the exchange of knowledge and information in business relationships lead to increased relationship specific investments (RSIs). Furthermore, such investment results in increased performance for the internationalising SME. Research commonly uses micro or macro properties of institutions to explain how institutional differences affect international business; however, limited research has been devoted to investigate how institutional differences, experienced through interaction in business relationships, affect the business relationship. This paper helps to close this gap by showing the effects of institutional differences on a relational level.

Keyword
Information and knowledge exchange; Institutional impediments; International business relationships; Relationship specific investments (RSI); Small- and medium-sized enterprises (SMEs); Structural equation modeling (SEM)
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-14171 (URN)10.1016/j.ibusrev.2010.04.002 (DOI)000283612100003 ()2-s2.0-77956910140 (Scopus ID)
Note
QC 20100722Available from: 2010-07-22 Created: 2010-07-22 Last updated: 2017-12-12Bibliographically approved

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