THE ROLE OF FINANCE IN THE DEVELOPMENT OF TECHNOLOGY-BASED SMES: EVIDENCE FROM NEW ZEALAND
Journal Title: Journal of Entrepreneurship, Business and Economics - Year 2013, Vol 1, Issue 1
Abstract
Purpose- In this paper we discuss an exploratory study that involved face to face, qualitative interviews with 20 technology-based small firms (TBSFs) and seven qualitative interviews with key informants and funders. The TBSFs were all located in New Zealand (NZ), a small open economy with a limited domestic market, a population of 4.3 million, current GDP per capita of US$32,260 (2010) and arguably an immature and limited financial infrastructure. The central research question for this study was whether TBSFs can raise appropriate finance that allows them to start, develop and remain in NZ? Design/methodology/approach- An exploratory study has involved a programme of 20 in-depth, face to face qualitative interviews with the founders and chief executives of TBSFs drawn from three contrasting locations in New Zealand and from across different technology-based sectors. A further seven interviews have been conducted with key informants drawn from the three locations. Findings- As might be expected from theory, there was a heavy reliance on internal funding and bootstrapping methods, although a number of TBSFs had in addition managed to raise additional private capital through their own contacts and networks. All the sample had relied upon internal funding to some extent. However, a total of 13 (65 per cent) either relied totally on internal funding (from the initial start-up) or relied upon a combination of internal funding, bootstrapping and private investors. Context was important with New Zealand being a small open and relatively remote economy when compared to the UK; where the EU provides a significant market for TBSF development. In contrast, NZ TBSFs, of necessity were heavily involved in distant overseas markets. Research Implications- There was evidence of a distinct finance gap in the external equity market in New Zealand. For amounts below NZ$1m, these could be sought from networks of business angels, even though such sources were limited and restricted. If the funding sought was in the range NZ$1m - $5m; this was likely to fall between the informal and formal venture markets. Associated with this was a distinct preference for relying on internal funding by NZ TBSFs. Originality/value- This paper provides a contribution by being the first serious study of TBSF development in New Zealand, specifically focusing on the role of finance. The example of TBSF develop ment in New Zealand’s small, open economy is significant and comparisons are drawn with the extent of funding gaps and similar issues in TBSF development from a UK based study. These comparisons enable the findings to be set in context and implications developed.
Authors and Affiliations
David Deakins, David North
Keywords
Related Articles
- EP ID EP40683
- DOI -
- Views 522
- Downloads 0
CREATIVE ECONOMIC DEVELOPMENT MODEL BASED ON COCONUT PRODUCTS THROUGH BUSINESS MENTORING
Creative economy is an economic sector that has given contribution in creating jobs, increasing exports, creating innovation and creativity, and providing a positive social impact in improving quality of life and toler...
WHAT CAN SCHUMPETER TELL US ABOUT WOMEN ENTREPRENEURSHIP IN IRAN?
Offering a view of entrepreneurship enhanced by innovation, Schumpeter underlined its importance in modern economics and business. The case of Iran, an economy recently opening to international markets and recovering f...
STRATEGIC MANAGEMENT IN NEW VENTURES: THE ROLE OF TECHNOLOGICAL, ORGANIZATIONAL AND ENVIRONMENTAL FACTORS
Today, as firms become more competitive in their fields, the use of strategic insights and management practices are becoming an integral part of the firms' activities- especially for new ventures which are in the early...
EMPLOYER BRANDING STRATEGIES EFFECTS ON JOB PURSUIT INTENTION OF BUSINESS SCHOOL UNDERGRADUATES: CASE STUDY OF OIL COMPANIES IN INDONESIA
Employers in Indonesia must set themselves apart from competitors to attract high quality graduates from the university since the competition for talent is so high. Therefore, employer needs to increase the value of co...
INFERENCE OF FDI IN INDIAN RETAIL SECTOR- SOME REFLECTIONS
Purpose- The Indian retail market, which was largely unorganized till the 1980s, has undergone an immense transformation in post-liberalization era. However, valued at $ 450 billion, the Indian retail sector is still r...