Early-stage Financing of University Spin-offs: The Impact of Entrepreneurial Capabilities and Social Networks of Founding Teams during Start-Ups.

Abstract

University spin-offs have increasingly received attention from academia, governments, and policymakers in studying the financing policies (Wonglimpiyarat, 2006, 2013), venture capital investment decision making (Aouni, Colapinto, & La Torre, 2013), the roles of venture capitalist in the development of new ventures (Paik & Woo, 2013), and the contributions of entrepreneur’s social capital to the fundraising activities (Ozmel, Robinson, & Stuart, 2013). However, the limited number of studies in understanding of the contribution made by the entrepreneurial capabilities and social networks of a founding team to its fundraising ability still remains, especially within university spin-off context. Employing resource-based view theory and social networks approach, this paper enriches the knowledge by exploring university spin-offs in Spain. Utilising an internet-based survey, this paper explores entrepreneurial capabilities and social networks of founding teams in Spanish university spin-offs using quantitative data analysis. The results empirically demonstrate that by exploiting social networks a founding team can improve its entrepreneurial capabilities, which in turn enhance its fundraising ability. By employing the works of Vohora et al. (2004a) and Shane (2004), this paper constructs a model in which entrepreneurial capabilities play a mediate role between the social networks and fundraising ability of the founding team. Thus, the paper has implications for universities in training and policy development to support spin-off’s activities. Value: This study addresses some fundamental questions to contribute to the theory-based understanding of university spin-offs: How do the entrepreneurial capabilities influence the fundraising ability of founding teams? How do the social networks contribute to the ability of founding teams in fundraising activities?