Financing Irish high-tech SMEs: The analysis of capital structure

Abstract

This paper analyses the capital structure of high-tech SMEs based in Ireland examining the determinants which influence the financing options. The main contribution of this paper is to provide analysis on the capital structure financing choices of the high-tech sector, and provide a new insight into the financing of high-tech SMEs through primary data.Regarding the primary data utilised in this paper, an original questionnaire was completed by high-tech SMEs in Ireland, which provides data that is novel and focused. The importance of internal sources particularly retained earnings is found amongst older firms. A change from equity finance to debt occurs within high-tech SMEs over time, while the relationship between the banking sector and high-tech firms has not improved over the past few years. Regression analysis finds a negative relationship between the use of incubators and accelerators with profitability. While a positive relationship between intangible assets and internal finance exists, while firms with previous start-up experience have a positive affiliation with equity finance. Additionally, the descriptive findings provide a thorough overview of the issues of financing and the paper presents data on intangible assets and human capital perspectives not often found in secondary databases. This combined with regression analysis, provides original novel insights into the capital structure of high-tech SMEs and the importance of firm characteristics.