A configurative analysis investigating how new technology-based firms gain the first financing round

Abstract

New technology-based firms (NTBFs) present high levels of information asymmetry since knowledge base, the intangibility of assets, and appropriability issues are particularly pronounced. Investors experiment with difficulties in evaluating the quality of NTBFs and look into insights representing the venture's promises and outlooks, and NTBFs need to face limited financing opportunities. Therefore, information asymmetries and moral hazards may influence the financing system of NTBFs. Based on the signaling theory, we propose a configurative approach built on five accessible signals (founders’ education and work experiences, property rights, alliances, and size) to identify combinations of signals conducive to the NTBF reaching a first financial round. By adopting a configurative approach through the qualitative comparative analysis, we advance our understanding of the intricate dynamics between NTBFs and investors, shedding light on the complexity and interplay of various factors influencing the financing outcomes.