The impact of venture capital financing method on SME performance and internationalization |
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Authors: | Jan Smolarski Can Kut |
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Affiliation: | (1) College of Business Administration, University of Texas Pan American, 1201 W. University Drive, Edinburg, TX 78539, USA;(2) School of Business Administration, Stockholm University, SE-106 91 Stockholm, Sweden |
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Abstract: | One of the basic premises of venture capital is leverage, which often means adding money and other resources to speed up growth. As a result, small- to medium-sized venture funded firms are expected to show significant growth at an early stage. Our research examines how equity based-venture funding methods affect SME performance and internationalization. We divide venture capital financing into several categories: incremental financing where firms receive their venture capital funding in portions, lump-sum funding where firms receive their funding in one lump-sum, syndication where two or more external investors participate in a single financing round and non-syndicated financing where one investor participates in a single financing round. The results show that type of equity-based venture capital financing affect performance and internationalization. Annual sales growth rate and annual turnover are used as proxies for performance. Export ratio is used as a proxy for internationalization. Staged financing and financing through a syndicate has a positive effect on performance and internationalization when used separately. We observe a negative effect when syndication and staged financing are used in combination. |
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