Effects of early-stage funding decisions to the performance of Finnish Born Global start-ups

Abstract

The purpose of this study is to analyze the impact that different early-stage funding decisions had on the performance of Finnish Born Global startups founded between 2009-2015 that were selected to the Young Innovative Company funding program. The theoretical framework is conducted from Born Global literature and more general startup funding literature. The Born Global part discusses the general characteristics of Born Global firms and typical early struggles that rapid internationalization causes. The startup funding part presents the different funding options that are available for startups including equity and non-equity options and prior research of the effects of equity funding on firm growth and performance. The common theme in previous studies that cover equity funding and its effect on start-ups is that equity funding accelerates growth and performance. The theoretical framework combines Born Global and startup funding literature and hypotheses are formed based on prevailing knowledge in the area that value added benefits of equity funding would push Born Global firms into higher performance and internationalization. The formed 12 hypotheses assume that private equity funded Born Global firms would exhibit significantly higher scores on chosen performance metrics.

The empirical part of the study is done as a quantitative study of the effects that different types of non-governmental funding had on the growth of 66 Finnish Born Global firms that were selected to the YIC program. To test the generated hypotheses this study utilizes non-parametric tests Mann-Whitney U test and Kruskal-Wallis H test to test statistical significance in four performance metrics absolute sales growth, average annual sales rate, employment growth, and foreign subsidiaries. The conducted statistical analysis supports 4 of the 12 hypotheses and additionally from the conducted descriptive statistics as well as from a small case study into Wolt the conclusion is that Venture Capital funded firms are more likely to exhibit higher employment growth as well as general positive outliers because of the higher risk tolerance and larger investments into growth in the early stages.