The impact of government financial support on the performance of new firms: the role of competitive advantage as an intermediate outcome

By Albena Pergelova, Fernando Angulo-Ruiz. 2014

162 citations recorded by the source corpus.

This research examines the influence of government financial support on new firms' performance. Extant empirical research on the topic has found mixed results, which warrants an exploration of the theoretical basis for the impact of support policies on new firms' performance. Grounding the theoretical model in the resource-based view and institutional theories, this study contends that performance outcomes – e.g. revenues or profits – should not be the first outcomes of public policies to be examined. Instead, competitive advantage formation is suggested as a link between support policies and new firms' performance. Using new firms from the USA, we examine the impact of government financial support measures – government loans, guarantees and government equity – on firms' overall competitive advantage and more specific types of competitive advantage based on innovation, licensing-in, marketing and human capital. Controlling for family funding, bank financing, equity of business angels and venture capitalists, industry, size as well as entrepreneur's characteristics, the results reveal that government guarantees and government equity have a direct effect on new firms' competitive advantage and only an indirect impact on performance. Our results suggest to policy-makers to focus on helping new firms build the necessary capabilities to compete successfully in the marketplace.

Subfields: Accounting, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/123ce2400b14351471f2a7e8ccbb9c96cc84c48a

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Citations in the corpus

The interrelationship between SME government support programs, entrepreneurial orientation, and performance: A developing economy perspective (2020, background): “…information, business advice and mentoring, trade fairs and missions for SMEs; and (b) FSPs, enabling programs that provide access to financial resources such as capital including loans, credit guarantees, microfinance, or grants (Cancino, Bonilla, & Vergara, 2015; Pergelova & Angulo-Ruiz, 2014).”
The Role of Government Support in Sustainable Competitive Position and Firm Performance (2018, background): “Pergelova and Angulo-Ruiz [39] examined the influence of government financial support (government equity, government loan and guarantees) on firms overall competitive advantage (innovation, marketing, licensing, human capital) and argued that government support has a significant direct influence on ”
Location determinants of high-growth firms (2015, background): “As another extension, Pergelova and Angulo-Ruiz (2014) suggest that neither firm revenues nor profits are reliable guides for choosing firms to support with public financial resources. their sample consists of new US firms.”