Financial bootstrapping: external financing dependency alternatives for SMEs
The sensitivity of external financing is the main issue in developing small and medium-sized enterprises (SME) in general. A similar problem is also experienced by several batik small and medium enterprises in Central Java, Indonesia. This research strives to explore the creative alternative strategies done by batik micro, small, and medium enterprises to reduce the dependence on external capital. The samples were chosen based on a purposive sampling method in three Central Java regions, namely Pekalongan Regency, Rembang Regency, and Surakarta Municipality. The data were then analyzed using a quantitative and qualitative descriptive approach. These research findings reveal that there are variations in the bootstrapping financing method; as well as financing profiles of each in the three regions that reveal the dynamics of business funding. Referring to the description of alternative funding patterns carried out by entrepreneurs, the bootstrapping strategy can be grouped into six (6) types based on the available resources. Batik entrepreneurs can overcome their financial problem by applying bootstrapping methods, so that businesses can operate properly.
Anderson, B. S., & Eshima, Y. (2013). The influence of firm age and intangible resources on the relationship between entrepreneurial orientation and firm growth among Japanese SMEs. Journal of Business Venturing, 28(3), 413–429. https://doi.org/http://doi.org/10.1016/j.jbusvent.2011.10.001
Barkham, R., & Gudgin, G. (2002). Determinants of small firm growth: An inter-regional study in the United Kingdom 1986-90 (Vol. 12). Psychology Press.
Blackburn, R. A., Hart, M., & Wainwright, T. (2013). Small business performance: business, strategy and owner-manager characteristics. Journal of Small Business and Enterprise Development, 20(1), 8–27.
Brown, T. E., Davidsson, P., & Wiklund, J. (2001). An operationalization of Stevenson’s conceptualization of entrepreneurship as opportunity‐based firm behavior. Strategic Management Journal, 22(10), 953–968.
Carbo‐Valverde, S., Rodriguez‐Fernandez, F., & Udell, G. F. (2016). Trade credit, the financial crisis, and SME access to finance. Journal of Money, Credit and Banking, 48(1), 113–143.
Coleman, S. (2004). Variations on a theme: Teaching entrepreneurial finance. Journal of Entrepreneurship Education, 7, 73–81.
Cornwall, J. R., Vang, D. O., & Hartman, J. M. (2015). Bootstrapping. In Entrepreneurial Financial Management (pp. 186–202). Routledge.
Dai, L., Maksimov, V., Gilbert, B. A., & Fernhaber, S. A. (2014). Entrepreneurial orientation and international scope: The differential roles of innovativeness, proactiveness, and risk-taking. Journal of Business Venturing, 29(4), 511–524.
Denis, D. J. (2004). Entrepreneurial finance: An overview of the issues and evidence. Journal of Corporate Finance, 10(2), 301–326.
Donald, L. L., John, A. P., & Shawn, C. (2003). Organizational life cycle: A five‐stage empirical scale. The International Journal of Organizational Analysis, 11(4), 339–354. https://doi.org/10.1108/eb028979
Ebben, J. J. (2009). Bootstrapping and the financial condition of small firms. International Journal of Entrepreneurial Behavior & Research, 15(4), 346–363.
Faff, R., Kwok, W. C., Podolski, E. J., & Wong, G. (2016). Do corporate policies follow a life-cycle? Journal of Banking and Finance, 69(C), 95–107. https://doi.org/10.1016/j.jbankfin.2016.04.009
Fatoki, O. (2013). An investigation into the financial bootstrapping methods used by immigrant entrepreneurs in South Africa. Journal of Economics, 4(2), 89–96.
Fatoki, O., & Odeyemi, A. (2010). The determinants of access to trade credit by new SMEs in South Africa. African Journal of Business Management, 4(13), 2763–2770.
Fraser, S., Bhaumik, S. K., & Wright, M. (2015). What do we know about entrepreneurial finance and its relationship with growth? International Small Business Journal, 33(1), 70–88. https://doi.org/10.1177/0266242614547827
Garcia-Tabuenca, A., & Crespo-Espert, J. L. (2010). Credit guarantees and SME efficiency. Small Business Economics, 35(1), 113–128.
Greenwald, B. C., & Stiglitz, J. E. (1986). Externalities in economies with imperfect information and incomplete markets. The Quarterly Journal of Economics, 101(2), 229–264.
Grichnik, D., Brinckmann, J., Singh, L., & Manigart, S. (2014). Beyond environmental scarcity: Human and social capital as driving forces of bootstrapping activities. Journal of Business Venturing, 29(2), 310–326.
Honig, B., Karlsson, T., & Hägg, G. (2014). The blessing of necessity and advantages of newness. In Entrepreneurial resourcefulness: Competing with constraints (pp. 63–94). Emerald Group Publishing Limited.
Jones, O., & Jayawarna, D. (2010). Resourcing new businesses: Social networks, bootstrapping and firm performance. Venture Capital, 12(2), 127–152.
Kim, Y. (2011). SMEs in Africa: Challenges and the role of government for the future. South Africa: Consultancy Africa.
Klonowski, D. (2016). Venture capital and entrepreneurial growth by acquisitions: A case study from emerging markets. The Journal of Private Equity, 19(3), 21–29.
Kreiser, P. M., & Davis, J. (2010). Entrepreneurial orientation and firm performance: The unique impact of innovativeness, proactiveness, and risk-taking. Journal of Small Business & Entrepreneurship, 23(1), 39–51.
López Salazar, A., Contreras Soto, R., & Espinosa Mosqueda, R. (2012). The impact of financial decisions and strategy on small business competitiveness. Global Journal of Business Research, 6(2), 93–103.
Mac an Bhaird, C., & Lynn, T. (2015). Seeding the cloud: Financial bootstrapping in the computer software sector. Venture Capital, 17(1–2), 151–170.
Madrid‐Guijarro, A., Garcia, D., & Van Auken, H. (2009). Barriers to innovation among Spanish manufacturing SMEs. Journal of Small Business Management, 47(4), 465–488.
Malmström, M. (2014). Typologies of bootstrap financing behavior in small ventures. Venture Capital, 16(1), 27–50.
Markova, S., & Petkovska-MirČEvska, T. (2010). Entrepreneurial finance: Angel investing as a source of funding high-growth start-up firms. Annals of the University of Petrosani, Economics, 10(3), 217–224.
Miao, C., Rutherford, M. W., & Pollack, J. M. (2017). An exploratory meta-analysis of the nomological network of bootstrapping in SMEs. Journal of Business Venturing Insights, 8(C), 1–8.
Neeley, L., & Van Auken, H. (2010). Differences between female and male entrepreneurs’use of bootstrap financing. Journal of Developmental Entrepreneurship, 15(1), 19–34.
Neely, L., & Van Auken, H. (2012). An examination of small firm bootstrap financing and use of debt. Journal of Developmental Entrepreneurship, 17(1), 1250002–1250012.
Rauch, A., Wiklund, J., Lumpkin, G. T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice, 33(3), 761–787.
Rita, M. R., Priyanto, S. H., Andadari, R. K., & Haryanto, J. O. (2018). How entrepreneurs anticipate the future market: An initial approach of a future market anticipation model for small businesses. Journal of Small Business Strategy, 28(1), 49–65.
Rita, M. R., Wahyudi, S., & Muharam, H. (2018). The dynamics of female entrepreneurs in fulfilling their financial needs: Demand side entrepreneurial finance perspective of small and medium-sized entreprises. Journal of Applied Economic Sciences, 12(8), 54–62.
Rocca, M. La, Rocca, T. La, & Cariola, A. (2011). Capital structure decisions during a firm’s life cycle. Small Business Economics, 37(1), 107–130. https://doi.org/10.1007/s11187-009-9229-z
Rutherford, M. W., Coombes, S. M. T., & Mazzei, M. J. (2012). The impact of bootstrapping on new venture performance and survival: A longitudinal analysis. Frontiers of Entrepreneurship Research, 32(12), 4.
Schinck, A., & Sarkar, S. (2012). Financial bootstrapping: A critical entrepreneurship skill. Centro de Estudos e Formação Avançada em Gestão e Economia da Universidade de Aveiro (Vol. 20).
Serrasqueiro, Z. S., Armada, M. R., & Nunes, P. M. (2011). Pecking order theory versus trade-off theory: Are service SMEs’ capital structure decisions different? Service Business, 5(4), 381–409.
Setyorini, C. T., Pinasti, M., & Rokhayati, H. (2013). Strengthening the internal factors of batik cluster smes in indonesia: A case of six districts in south-central java. International Journal of Business, Humanities and Technology, 3(1), 21–28.
Thornton, P. H., Ribeiro-Soriano, D., & Urbano, D. (2011). Socio-cultural factors and entrepreneurial activity: An overview. International Small Business Journal, 29(2), 105–118.
Vanacker, T., Manigart, S., Meuleman, M., & Sels, L. (2011). A longitudinal study on the relationship between financial bootstrapping and new venture growth. Entrepreneurship & Regional Development, 23(9–10), 681–705.
Vanacker, T., & Sels, L. (2009). Bootstrapping strategies and entrepreneurial growth: A longitudinal study (Summary). Frontiers of Entrepreneurship Research, 29(1), 6.
Vasilescu, L. G. (2010). Financing gap for SMEs and the mezzanine capital. Economic Research-Ekonomska Istraživanja, 23(3), 57–67.
Wehinger, G. (2013). SMEs and the credit crunch: Current financing difficulties, policy measures and a review of literature. OECD Journal: Financial Market Trends, 2013(2), 1–34.
Winborg, J. (2009). Use of financial bootstrapping in new businesses: A question of last resort? Venture Capital, 11(1), 71–83.
Winborg, J., & Landström, H. (2001). Financial bootstrapping in small businesses: Examining small business managers’ resource acquisition behaviors. Journal of Business Venturing, 16(3), 235–254. https://doi.org/10.1016/S0883-9026(99)00055-5
Wing, L. (2010). Funding gap, what funding gap? Financial bootstrapping: Supply, demand and creation of entrepreneurial finance. International Journal of Entrepreneurial Behavior & Research, 16(4), 268–295. https://doi.org/10.1108/13552551011054480
Wu, D. (2009). Measuring performance in small and medium enterprises in the information and communication technology industries. School of Management College of Business. RMIT University.
Yazdipour, R. (2011). Advances in Entrepreneurial Finance. Springer.
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Jurnal Ekonomi dan Bisnis is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License