Financial bootstrapping and social capital: how technology-based start-ups fund innovation

Innovation requires more than technological expertise. It is a time consuming activity requiring access to a range of resources including finance. Yet, innovators involved in start-ups rarely have direct access to significant financial resources. Instead, they turn to a variety of forms of financial bootstrapping. Defined as access to resources not owned or controlled by the individual innovator, bootstrapping involves imaginative and parsimonious strategies for marshalling and gaining control of resources. This paper reports on research into bootstrapping using case studies, drawn from biographies of well-known innovators. The study found that bootstrapping was widespread and innovators showed great ingenuity in obtaining finance without recourse to conventional financial institutions. Not only were ranges of bootstrapping techniques employed, the study also provided valuable insights into the importance of social capital, in the form of networks of friends, colleagues and other contacts, in providing innovators with access to bootstrapping finance

“All that glitters is not gold!”: The (unexplored) determinants of equity crowdfunding

Drawing from the rich literature in behavioural finance and extensive analysis of forum data from a UK equity crowdfunding platform, we present a comprehensive framework that delineates the investment decision-making process of equity crowdfunders. Our framework captures the utilitarian, emotional, and expressive investment motives that drive crowdfunders, their behaviours and actions during and after the campaign, as well as the challenges they encounter in fulfilling their investment goals. Our work highlights the crucial need to explore the extent to which entrepreneurs and crowdfunding platforms cater to the diverse investment motives and expectations of the crowd. We offer practical insights to entrepreneurs and platforms on how they can better align their strategies with the expectations and needs of equity crowdfunders

Entrepreneurial resourcefulness in unstable institutional contexts - the example of European Union borderlands

This paper advances our understanding of entrepreneurial resourcefulness in unstable institutional contexts, which are characterized by resource constraints and institutional changes but are rich in intangible resources of a socio-cultural nature. Drawing on qualitative data of individuals engaged in informal cross border activities in EU borderlands, we theorize resourcefulness along two core dimensions: continuity and change in relation to socio-cultural, spatial and institutional conditions and, development and coping as outcomes. We identify six configurations of resourcefulness patterns and outcomes that extend current understandings of the variations in how individuals interact with their contexts offering, therefore, a nuanced view of resourcefulness

Resourcing Social Enterprises: The Role of Socially Oriented Bootstrapping

Resource constraints are a challenge for social enterprises, prompting interest in innovative approaches to address these deficiencies. In this study, we contribute to the literature on resourcing practices in small, early stage, social enterprises by examining the role of socially oriented bootstrapping for resource access. We use data from eight UK social enterprises to reveal organizational practices – building credibility, leveraging persuasion and creating resource communities – that shape a diverse set of bootstrapping mechanisms to facilitate exchange relationships and to enable resource acquisition and mobilization. We argue that the unique position of social enterprises allows them to benefit from socially orientated bootstrapping and they display a complex approach that is shaped by a creative interplay of practices to support value creation through resource exchange

Waste Livelihoods Amongst the Poor – Through the Lens of Bricolage

This paper examines two social enterprises and 25+ informal economy micro-entrepreneurs in Kenya who utilize waste materials to generate income, considered through the conceptual lens of bricolage. Waste materials can all be considered as sources of free or discounted materials that in resource-constrained and poor communities might be leveraged to generate income in the absence of employment. This paper explores three key themes that emerge from the research findings, namely the various strategic dimensions of the cases, the networks and social capital they leverage and how these livelihood models relate to various dimensions of bricolage such as improvisation, making do and the process of ‘fiddling’ or recombining resources. The findings also suggest that differing waste livelihoods have different rates of return, or profitability, and differing input requirements of capital, skills and knowledge. The paper also stresses the role of boundary spanning organizations such as NGOs and hybrid/social enterprises

The role of financial bootstrapping in handling the liability of newness in incubator businesses

Recent research in entrepreneurship has examined factors that could reduce the challenges facing new businesses (the so-called ‘liabilities of newness’). Seeking to contribute to this research, this study examines the potential role of a financial bootstrapping approach (finding ways of securing resources on favourable terms). Even though financial bootstrapping has received increased attention in entrepreneurship research, our understanding of the relative importance of financial bootstrapping is undeveloped. This study focuses on new businesses established in Swedish university incubators and is based on data from a questionnaire sent to 120 new business founders. Given the role of incubators to provide resources and contacts on favourable terms, it can be argued that they represent an institutionalized arena in which new businesses can identify bootstrapping possibilities. The findings show that the possession of a financial bootstrapping approach is beneficial for handling the external liability of newness, whereas no significant effects were found on the internal liability of newness

The Potential of Bootstrapping Research for Advancing the Understanding of the Role of Resources in Corporate Entrepreneurship

Over the years we have seen an increased interest in businesses and in research for how to create conditions for entrepreneurship in established businesses (referring to corporate entrepreneurship). From research we know that access to and use of resources is critical for realizing corporate entrepreneurship activities. Even though the role of resources has been examined this conceptual paper identifies areas in need of development. The aim of the paper is to introduce and use insights from research in the area of bootstrapping to provide implications for how to advance the research related to the role of resources in corporate entrepreneurship. Bootstrapping is a concept that has been discussed in the independent entrepreneurship (new venture creation) context and refers to creative ways of acquiring the use of resources without using long-term external finance. The paper provides implications for development in two areas referring to two different levels of analysis. First, the paper discusses potential contributions from bootstrapping research for developing the understanding of how corporate entrepreneurs/intrapreneurs mobilize resources (referring to the individual level of analysis). Second, the paper presents implications from bootstrapping research for advancing our understanding of the role of resources for businesses seeking to renew their strategy and more specifically seeking to renew the business model. Business model as one area of corporate entrepreneurship has received much interest but the knowledge is still limited, and this in particular when it comes to how businesses actually are able to change and renew the business model

Financing Small Businesses - Developing our Understanding of Financial Bootstrapping Behavior

The overall aim of this composite thesis, consisting of five articles, is to develop concepts for furthering the understanding of small business managers´ handling of finance. The main contribution is the development of a conceptual understanding of so-called financial bootstrapping behavior in small businesses (referring to the use of methods for minimizing and/or eliminating the need for financial means for resource acquisition). Empirical data has been collected through two survey studies and one case study. The aim of the first survey study is to describe small business managers´ attitudes towards and use of financial sources and to identify variables influencing the use of financial sources. The overall conclusion is that the small business managers´ financial preferences and behaviors are in line with Myers´ (1984) Pecking Order Framework (POF). In the second survey, the use of financial bootstrapping in small businesses is examined. On the basis of a cluster analysis, different groups of bootstrappers are identified and named. Furthermore, variables separating the groups of bootstrappers are isolated. Finally, it is shown how the groups of bootstrappers differ in terms of their orientation towards handling the need for resources, referring to an internal, social and a quasi-market mode of resource acquisition. One of the groups identified from the analysis of the data was labeled relationship-oriented financial bootstrappers, distinguished by their reliance on personal relations with external actors for securing resources at favorable terms. In a third stage, a case study was undertaken focusing exclusively on the use of relationship-oriented financial bootstrapping. The findings from the case study show, among other things, that different modes of trust are important means for the relationship-oriented bootstrapper in securing access to, and use of, resources. It is moreover, shown how the use of different modes of trust changes over the development of the business. Furthermore, insights from the case study, together with literature studies within sociology, indicate that the behavior of the relationship-oriented financial bootstrapper can be understood as a social contracting behavior for securing the needed resources. Against this background, the final step in the thesis is to develop the conceptual understanding of the unique characteristic of social contracting, as opposed to financial contracting, for resources. In so doing, it is shown, among other things, how the concepts of social obligation, social capital, and trust together constitute the basis for social contracting