The relevance of pecking order hypothesis for the financing of computer software and biotechnology small firms: some UK evidence |
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Authors: | Farid Ullah Qaisar Abbas Saeed Akbar |
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Institution: | (1) COMSATS Institute of Information technology (CIIT), Islamabad, Pakistan;(2) University of Liverpool Management School, Liverpool, England |
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Abstract: | This study explores the funding issues at the early stages of development of computer software and biotechnology small firms
in the UK. This study reviewed previous relevant literature in this area and presents empirical evidence derived from an extensive
online questionnaire survey. The sample contains a total of 83 small firms, which includes 41 biotechnology and 42 software
firms. With regards to funding issues, we found that software firms reports more funding problems than the biotechnology firms.
Software firms are fastest growing firms and goes through the early stages of development quicker than the biotechnology firms.
With regards to the sources of funding the evidence shows that biotechnology small firms mainly use venture capital finance
whilst the main source of funding for the software firms are personal savings and house mortgage/re-mortgage. On the one hand,
software firms seem to follow the pecking order hypothesis whilst financing their business growth and development. On the
other hand, the pecking order hypothesis may not be fully followed by the biotechnology small firms. However, both software
and biotechnology small firms report difficulties in securing equity finance. Software firms are financially constrained not
only due to the supply side financial constraints but also by the demand side financial constraints. |
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