Financial bootstrapping and venture development in the software industry

Harrison, R.T., Mason, C.M. and Girling, P. (2004) Financial bootstrapping and venture development in the software industry. Entrepreneurship and Regional Development, 16(4), pp. 307-333. (doi: 10.1080/0898562042000263276)

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Access to finance has been identified as a significant constraint on the development of technology-based businesses. Although important, institutional venture capital and business angel finance are used by only a small proportion of new and growing ventures. The role of bootstrapping – defined here as access to resources not owned or controlled by the entrepreneur – has been largely overlooked in studies of small firm financing. This paper redresses this omission by analysing the role and importance of bootstrapping in product development and business development in the independently-owned software industry. Results from two regions of the UK – Northern Ireland and South East England – are compared with equivalent data from the USA (Massachusetts). Overall, bootstrapping techniques are less extensively used in the Northern Ireland industry than in South East England, and in both regions bootstrapping is less common than in Massachusetts. This may account for the smaller employment size, growth profile and stronger service/consulting orientation of these firms. Moreover, there appear to be considerable variations in the use of bootstrapping. Larger firms tend to make more use of bootstrapping for product development, and consider it more important than do smaller firms, who more highly value business development-related bootstrapping. Small firms are also more likely to use and value cost-reducing bootstrapping techniques, whereas larger firms make more use of the exploitation of value-chain based relationships.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Mason, Professor Colin
Authors: Harrison, R.T., Mason, C.M., and Girling, P.
College/School:College of Social Sciences > Adam Smith Business School > Management
Journal Name:Entrepreneurship and Regional Development
ISSN (Online):1464-5114

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