Acquiring financial resources to form new ventures: the impact of personal characteristics on organizational emergence

Abstract

Conventional wisdom says that friends, family, and fools provide startup financing. Beyond this platitude, little evidence is available about who acquires precisely what sources of financing during the earliest stages of starting a venture. This study argues for a more nuanced view of the financing of emerging firms that extends prior research on large businesses and small- and medium-sized enterprises. Drawing on human capital and pecking order theory, this study finds that nascent entrepreneurs in the process of creating an organization follow paths of least resistance when acquiring financial resources, which differ according to the entrepreneur's race, as well as firm and industry characteristics.

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