Outstanding paperBootstrapping and the financial condition of small firms

Citation

Ebben, J.J. (2010), "Outstanding paperBootstrapping and the financial condition of small firms", International Journal of Entrepreneurial Behavior & Research, Vol. 16 No. 6. https://doi.org/10.1108/ijebr.2010.16016faa.002

Outstanding paperBootstrapping and the financial condition of small firms

Article Type: Awards for Excellence From: International Journal of Entrepreneurial Behaviour & Research, Volume 16, Issue 6

Bootstrapping and the financial condition of small firms

Jay J. EbbenUniversity of St Thomas, St Paul, Minnesota, USA

Purpose – The purpose of this paper is to investigate relationships between financial condition and the use of bootstrapping in small firms.Design/methodology/approach – A total of 901 manufacturing firms were selected from a comprehensive financial database containing income statement and balance sheet records. Surveys were sent to each of these firms and 186 firms returned usable surveys. Survey responses on bootstrapping techniques were compared with financial data for these 186 firms. Both the initial financial status and the financial status of these firms two years later were analysed.Findings – The results indicate that highly levered, illiquid, and under performing firms were more likely to use certain bootstrapping methods than other firms, and that the methods they used may have been detrimental to future firm performance.Research limitations/implications – The findings support a resource dependence model and raise questions as to why financially constrained firms chose to use particular bootstrapping methods. Generalizability of the study is limited due to the homogeneous sample of manufacturing firms and due to the sample and recall biases associated with surveys.Practical implications – Small business owners should understand the options available for bootstrapping as well as the importance of proactive as opposed to reactive financial strategy.Originality/value – This is one of the first empirical studies that investigates the relationship between financial condition and bootstrapping, and it provides insight into how and when small firms bootstrap as well as some potential implications of bootstrapping on firm outcomes.

Keywords: Accounting, Debts, Entrepreneurialism, Equity capital, Financial performance, Small enterprises

www.emeraldinsight.com/10.1108/13552550910967930

International Journal of Entrepreneurial Behaviour & Research

Volume 15 Number 4, 2009, pp. 346-63

Editor: Professor Oswald Jones

Highly Commended

“Social constructionism and entrepreneurship: basic assumptions and consequences for theory and research”, Monica Lindgren and Johann Packendorff, Vol. 15 No. 1, 2009

Outstanding Reviewer

Sarah Drakopoulou-Dodd, American University of Athens, Greece