Financial signaling by innovative nascent entrepreneurs

Arbeitspapier

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project's feasibility. Our analysis of 900 nascent entrepreneurs finds that patents and prototypes increase the likelihood of obtaining equity finance. Thus, if signals are credible, innovation positively impacts external financing. Interestingly, entrepreneurs in planning versus early start-up stage portray different signaling effects, indicating that the relation between finance and innovation depends on the stage of a start-up lifecycle.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Schumpeter Discussion Papers ; No. 2009-001

Classification and Topics

• Classification: Wirtschaft ; Entrepreneurship ; New Firms; Startups ; Information and Market Efficiency; Event Studies; Insider Trading ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Intellectual Property and Intellectual Capital
• Subject: Innovation ; Entrepreneurship ; Finance ; Information Asymmetries ; Unternehmensgründung ; Risikokapital ; Eigenkapital ; Patent ; Produkt ; Signalling ; Finanzierung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Audretsch, David B. ; Bönte, Werner ; Mahagaonkar, Prashanth
• Event: Veröffentlichung
• (who): University of Wuppertal, Schumpeter School of Business and Economics
• (where): Wuppertal
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/68701
• URN: urn:nbn:de:hbz:468-20090062
• Last update: 10.03.2025, 11:44 AM CET