Financing Small Businesses - Developing our Understanding of Financial Bootstrapping Behavior

Sammanfattning: The overall aim of this composite thesis, consisting of five articles, is to develop concepts for furthering the understanding of small business managers´ handling of finance. The main contribution is the development of a conceptual understanding of so-called financial bootstrapping behavior in small businesses (referring to the use of methods for minimizing and/or eliminating the need for financial means for resource acquisition). Empirical data has been collected through two survey studies and one case study. The aim of the first survey study is to describe small business managers´ attitudes towards and use of financial sources and to identify variables influencing the use of financial sources. The overall conclusion is that the small business managers´ financial preferences and behaviors are in line with Myers´ (1984) Pecking Order Framework (POF). In the second survey, the use of financial bootstrapping in small businesses is examined. On the basis of a cluster analysis, different groups of bootstrappers are identified and named. Furthermore, variables separating the groups of bootstrappers are isolated. Finally, it is shown how the groups of bootstrappers differ in terms of their orientation towards handling the need for resources, referring to an internal, social and a quasi-market mode of resource acquisition. One of the groups identified from the analysis of the data was labeled relationship-oriented financial bootstrappers, distinguished by their reliance on personal relations with external actors for securing resources at favorable terms. In a third stage, a case study was undertaken focusing exclusively on the use of relationship-oriented financial bootstrapping. The findings from the case study show, among other things, that different modes of trust are important means for the relationship-oriented bootstrapper in securing access to, and use of, resources. It is moreover, shown how the use of different modes of trust changes over the development of the business. Furthermore, insights from the case study, together with literature studies within sociology, indicate that the behavior of the relationship-oriented financial bootstrapper can be understood as a social contracting behavior for securing the needed resources. Against this background, the final step in the thesis is to develop the conceptual understanding of the unique characteristic of social contracting, as opposed to financial contracting, for resources. In so doing, it is shown, among other things, how the concepts of social obligation, social capital, and trust together constitute the basis for social contracting.