This article reports findings from a scoping study, commissioned by the Scottish Executive, on ethnic minority businesses (EMBs) and their distinctive importance in Scotland. The study combines quantitative and qualitative analysis and builds upon previous research undertaken in the UK and Scotland to investigate the changing importance of known issues with EMBs for Scotland. The role and importance of social capital for EMBs in Scotland has not been explored in previous research, although because of strong informal networks, it has been feasible to assume that its role is beneficial. In this article, we examine the role of social capital and demonstrate that its role is more complex and diverse.
There has been little research on the processes of providing support to new firm entrepreneurs, and little evaluation of the provision of support to existing small firm entrepreneurs through advice, counselling or consultancy. Despite this lack of research, support for new firm entrepreneurs has been largely withdrawn in England and Wales with the focus of support, through Personal Business Advisers (PBAs), targeted at existing small firm entrepreneurs who employ more than 20 people and have the potential for growth. There are theoretical arguments that suggest support for new start entrepreneurs should be provided on a mentoring basis. If this is provided selectively, then this should have an impact on the management ability and confidence of such new firm starts. This paper reports the results of interviews with new firm entrepreneurs engaged in such a mentoring relationship. The research, undertaken in Scotland, suggests that such a relationship is beneficial. Given the high failure rates of new firm formation, such support could have wider application and benefits. It is suggested that, for certain regions, provision of new firm support can yield positive and worthwhile returns to public sector investment, particularly in a region such as the West of Scotland, characterised by a need to diversify its economy and raise the formation rate of new start small firms and entrepreneurs.
Purpose -The purpose of this research is to explore whether the "pecking order hypothesis" (POH) applies to the capital finance preferences of start-up businesses. Design/methodology/approach -In-depth interviews with 20 Scotland-based entrepreneurs were conducted in order to reveal the subtleties of the capital finance preferences which applied to a sample of start-up firms. To ensure reliability and validity, data was analysed using a systematic schema. Findings -Consistent with the POH we found that entrepreneurs in start-ups turn to internal sources first, that is, their own funds. In contradiction to the POH, however, evidence in this paper finds that where external funds are required, the main source is equity rather than debt. In the majority of cases, in depth interviews show that a bridged pecking order applies in that the businesses move from self-funding to external equity in preference to, or instead of bank finance. Two reasons for this pattern can be established. First, entrepreneurs consider debt to be a personal liability as it invariably requires to be underwritten by personal guarantees. Entrepreneurs place a self-imposed limit on the extent to which they are prepared to mortgage their assets. Second, entrepreneurs deliberately seek out equity investment as a means of obtaining added value over and above the finance invested. Rather than the external equity being viewed as expensive, it is viewed as good value as a well-chosen investor can add business skills and social capital in the form of commercial contacts and access to relevant networks. Practical implications -Entrepreneurs searching for investment should assess the post-investment role they wish investors to play. Successful consideration of this issue will make it more likely that a start-up business obtains external finance and that entrepreneurs achieve good "matches" with investors, and vice versa. Originality/value -The value of this paper rests in its finding that a bridged pecking order may apply to start-up firms in that entrepreneurs move directly from self-funding to equity.
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