Some evidence of the external financing costs of new technology-based firms in Canada.

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  • Additional Information
    • Subject Terms:
    • Author-Supplied Keywords:
      External financing cost
      financing
      information asymmetry
      new technology-based firms
      small business
    • Abstract:
      This exploratory study attempts to estimate the external financing costs (EFCs) for a sample of new technology-based firms (NTBFs). A large body of literature describes the constraints these companies face when trying to obtain outside equity from venture capitalists or non-institutional investors. The theory explains some of these difficulties by the prevalence of information asymmetry, agency costs and moral hazard problems. For NTBFs, these phenomena cause the search for outside equity to be a time-consuming, costly process: the EFCs should thus be considerable, but are a largely unexplored aspect of the small business financing problem. We propose an estimation of these EFCs. Some of these costs are not reported in the financial statements and can be determined only through a field survey and case analyses. In this study, we identify the elements that generate the EFCs and estimate the time frames and costs associated with 18 financing rounds undertaken by 12 NTBFs in Canada. We show that these costs are indeed substantial and heavily penalize small companies, especially during the initial financing round and prior to the commercialization phase. Based on our initial propositions and observations, we conclude that the EFCs are higher for the first round of financing, for companies that have not reached the commercialization stage, and are lower as gross proceeds increase. [ABSTRACT FROM AUTHOR]
    • Abstract:
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    • Author Affiliations:
      1CIRANO Research Center, Montreal and Laval University, Quebec, Canada
    • ISSN:
      1369-1066
    • Accession Number:
      10.1080/13691060600748421
    • Accession Number:
      21459729
  • Citations
    • ABNT:
      CARPENTIER, C.; SURET, J.-M. Some evidence of the external financing costs of new technology-based firms in Canada. Venture Capital, [s. l.], v. 8, n. 3, p. 227–252, 2006. DOI 10.1080/13691060600748421. Disponível em: http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=buh&AN=21459729. Acesso em: 2 jun. 2020.
    • AMA:
      Carpentier C, Suret J-M. Some evidence of the external financing costs of new technology-based firms in Canada. Venture Capital. 2006;8(3):227-252. doi:10.1080/13691060600748421.
    • APA:
      Carpentier, C., & Suret, J.-M. (2006). Some evidence of the external financing costs of new technology-based firms in Canada. Venture Capital, 8(3), 227–252. https://doi.org/10.1080/13691060600748421
    • Chicago/Turabian: Author-Date:
      Carpentier, Cécile, and Jean-Marc Suret. 2006. “Some Evidence of the External Financing Costs of New Technology-Based Firms in Canada.” Venture Capital 8 (3): 227–52. doi:10.1080/13691060600748421.
    • Harvard:
      Carpentier, C. and Suret, J.-M. (2006) ‘Some evidence of the external financing costs of new technology-based firms in Canada’, Venture Capital, 8(3), pp. 227–252. doi: 10.1080/13691060600748421.
    • Harvard: Australian:
      Carpentier, C & Suret, J-M 2006, ‘Some evidence of the external financing costs of new technology-based firms in Canada’, Venture Capital, vol. 8, no. 3, pp. 227–252, viewed 2 June 2020, .
    • MLA:
      Carpentier, Cécile, and Jean-Marc Suret. “Some Evidence of the External Financing Costs of New Technology-Based Firms in Canada.” Venture Capital, vol. 8, no. 3, July 2006, pp. 227–252. EBSCOhost, doi:10.1080/13691060600748421.
    • Chicago/Turabian: Humanities:
      Carpentier, Cécile, and Jean-Marc Suret. “Some Evidence of the External Financing Costs of New Technology-Based Firms in Canada.” Venture Capital 8, no. 3 (July 2006): 227–52. doi:10.1080/13691060600748421.
    • Vancouver/ICMJE:
      Carpentier C, Suret J-M. Some evidence of the external financing costs of new technology-based firms in Canada. Venture Capital [Internet]. 2006 Jul [cited 2020 Jun 2];8(3):227–52. Available from: http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=buh&AN=21459729