Abstract
Purpose – The purpose of this paper is to investigate the effects of small business entrepreneurs’ relinquishment of control aversion and the impact of their interaction with external financiers on market connection. Design/methodology/approach – Questionnaires were sent to the chief executive officers of small businesses in the manufacturing and professional services sectors. A total of 459 valid responses were analyzed in a structural equation model. Findings – The attitude of small business entrepreneurs in relying on financiers’ advice is marked by control aversion. This fear of losing control creates information asymmetry, which in itself leads to decreased financing opportunities for small business entrepreneurs. The results of the study suggest that small firms seeking the aid of financiers will be provided with substantial additional information about the market. Issues pertaining to supply seem to be less relevant than those relating to demand, thus indicating that greater focus should be placed on the investment readiness of small businesses. Originality/value – This study emphasizes the importance of the role of attitudes among SMEs in understanding capital market failure and credit rationing.
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