Problem-Solving Approaches, Working Capital Management, and New Venture Performance

Abstract

This study investigates how, under the pressure of working capital constraints, a problem-solving approach influences decision-makers’ financing decisions, and also how it affects consequent venture performance. Using a mixed-method research design including a survey study, a text-based analysis based on secondary data, and a behavioral laboratory experiment, we show that decision-makers with limited working capital (i.e., financial constraints) who use an abstract problem-solving approach can achieve better new venture performance compared with those using a concrete problem-solving approach. Implications for new venture managers and policymakers are discussed.