Five Essays on Entrepreneurial Finance: Exploring New Ventures’ Financing Sources Inaugural-Dissertation to obtain the degree of Doctor of Business Administration (doctor rerum politicarum – Dr. rer. pol.) submitted to the Faculty of Business Administration and Economics Heinrich Heine University Düsseldorf presented by Elmar Lins Research Assistant at Riesner Endowed Professorship in Entrepreneurship / Entrepreneurial Finance Heinrich Heine University Düsseldorf Düsseldorf 2016 Dedicated to my family. Acknowledgements First and foremost, I would like to express my deep gratitude to Prof. Dr. Eva Lutz for her guidance throughout the entire process of completing this dissertation. I have marveled at and learnt from the lucidity of her feedback, and her relentless push for improvement and simplicity. I hope she can find traces of her teaching in this manuscript. Furthermore, I would like to thank Prof. Dr. Christoph Börner who kindly agreed to join the dissertation committee. His work on entrepreneurship served to be an immense inspiration for my research. I own earnest thankfulness to Prof. Dr. Hanna Hottenrott, whose foresightedness and generosity have constantly left me speechless. While she provided me the freedom to develop my own ideas, her support and advice over the last few years were invaluable to completing this dissertation. I am indebted to the Center for European Economic Research and KfW Bankengruppe for offering me the opportunity to work with the KfW/ZEW-Startup Panel. In particular, I am tremendously thankful to Dr. Sandra Gottschalk for providing me with a great research infrastructure and her helpful advice on the framing the project. I also would like to thank my colleagues from the Heinrich-Heine-University of Düsseldorf. Our discussions and friendship have provided an inspiring environment that contributed substantially to this project. My special thanks go to Dr. Mischa Hesse, Dr. Patrick Harnischmacher and Ilkay Gecgel, M.Sc. Finally, I would not have started this project without the endless support of my family, particularly Anna Lins, Elisabeth Lins and Werner Lins. I express my gratitude to them for their unconditional support, and to Kaja Fietkiewicz, my love, for taking this adventure with me. Elmar Lins Düsseldorf, December 11, 2016 Table of contents I Table of contents Table of contents ......................................................................................................................... I Table of figures ........................................................................................................................ III List of tables ............................................................................................................................. IV List of abbreviations .................................................................................................................. V 1 Introduction ..................................................................................................................... 1 1.1 Entrepreneurial finance research ..................................................................................... 1 1.2 Financing through the life cycle of new ventures ........................................................... 3 1.2.1 Pre-seed financing for new ventures ........................................................................... 3 1.2.2 Types of seed financing sources .................................................................................. 4 1.2.3 First-round financing for successful new ventures ...................................................... 6 1.2.4 Financing during the rapid-growth-stage of successful new ventures ........................ 7 1.3 Motivation and research gaps .......................................................................................... 8 1.4 Contributions ................................................................................................................. 12 1.5 Synopsis ........................................................................................................................ 14 2 The investment challenge of financial debt: Survival dynamics of new technology- based firms .................................................................................................................... 19 2.1 Introduction ................................................................................................................... 19 2.2 NTBF survival and the investment challenge of financial debt .................................... 21 2.3 Hypothesis development ............................................................................................... 23 2.3.1 Debt investments in tangible assets ........................................................................... 23 2.3.2 Debt investment in R&D projects ............................................................................. 24 2.3.3 Debt investments in human capital ............................................................................ 26 2.4 Methodology ................................................................................................................. 27 2.4.1 Data and variables ..................................................................................................... 27 2.4.2 Econometric model .................................................................................................... 30 2.5 Results ........................................................................................................................... 32 2.6 Conclusion ..................................................................................................................... 36 3 The effect of subsidies on new ventures’ access to bank loans .................................... 39 3.1 Introduction ................................................................................................................... 39 3.2 Theoretical background ................................................................................................. 41 3.2.1 Relationships between new ventures, subsidies, and bank loans .............................. 41 3.2.2 Subsidy receipt as quality certification ...................................................................... 42 3.2.3 Effect of subsidy receipt for new manufacturing ventures ........................................ 44 3.2.4 Effect of subsidy receipt for new service ventures .................................................... 45 3.3 Econometric framework ................................................................................................ 46 3.4 Data and descriptive statistics ....................................................................................... 47 3.4.1 Empirical setting: The KfW/ZEW Start-up panel ..................................................... 47 3.4.2 Variables .................................................................................................................... 48 3.5 Results ........................................................................................................................... 54 3.5.1 Effect of subsidy receipt on bank loan access ........................................................... 54 3.5.2 Non-parametric matching approach and specification tests ...................................... 58 Table of contents II 3.6 Conclusion ..................................................................................................................... 60 4 How do public subsidies influence venture capital access? An examination of cross- national and national grants ........................................................................................... 62 4.1 Introduction ................................................................................................................... 62 4.2 NTBFs and venture capital funding .............................................................................. 63 4.3 Subsidy support for NTBFs ........................................................................................... 64 4.3.1 The role of subsidy certification for venture capital funding .................................... 64 4.3.2 Differences between cross-national and national grants ........................................... 66 4.4 Data and methodology .................................................................................................. 68 4.4.1 KfW/ZEW Start-up panel .......................................................................................... 68 4.4.2 Econometric framework ............................................................................................ 71 4.5 Results ........................................................................................................................... 72 4.6 Conclusion ..................................................................................................................... 76 5 Bridging the gender funding gap: Do female entrepreneurs have equal access to venture capital? ............................................................................................................. 79 5.1 Introduction ................................................................................................................... 79 5.2 Background literature .................................................................................................... 81 5.2.1 Role of venture capital in new ventures ...................................................................