Publicly funded pre-start support for new firms: who demands it and how it affects their employment growth

This paper examines pre-start determinants of the demand for publicly funded external support to new ventures. It also investigates the effects of different types of such support on subsequent firm growth. Adopting resource-based and information asymmetry approaches, the paper argues that the entrepreneurs who ask for publicly funded pre-start support are more likely to face information asymmetries with regard to resource providers, which in turn depend on their level of human and social capital. It also suggests that intangible support oriented towards knowledge generation would be the most beneficial. A series of two-stage treatment effects models applied to a representative sample of new firms in Navarra (Spain) offer considerable support to our predictions. Implications for research and policy are discussed.The authors wish to acknowledge the financial support received to conduct this research from the Government of Navarra under project PA03018. Support from the Spanish Ministry of Science and Technology is also acknowledged (Projects ECO2010-21242-C03-01, ECO2010-21242-C03-03 and ECO2010-21393-C04-03)