Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68701
Authors: 
Audretsch, David B.
Bönte, Werner
Mahagaonkar, Prashanth
Year of Publication: 
2009
Series/Report no.: 
Schumpeter Discussion Papers 2009-001
Abstract: 
External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project's feasibility. Our analysis of 900 nascent entrepreneurs finds that patents and prototypes increase the likelihood of obtaining equity finance. Thus, if signals are credible, innovation positively impacts external financing. Interestingly, entrepreneurs in planning versus early start-up stage portray different signaling effects, indicating that the relation between finance and innovation depends on the stage of a start-up lifecycle.
Subjects: 
Innovation
Entrepreneurship
Finance
Information Asymmetries
JEL: 
L26
M13
G14
G24
G32
O34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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