Entrepreneurial orientation and start-ups' external financing

ABSTRACT This study extends the Pecking Order Theory by investigating the role of start-ups' strategic posture for financial decision-making. Using a contingency approach, it proposes that a start-up's entrepreneurial orientation differently affects the costs and benefits associated with external debt and equity financing, and thereby its use of the respective financing forms; with the strength of these relationships depending on industry-level risk and venture development stage. The study tests and confirms these hypotheses on a sample of 4456 German start-ups. It advances the entrepreneurial finance literature by taking strategic posture and its contingencies into account, and adds insight in the relationship between entrepreneurial orientation and firm performance. It also provides valuable practical implications for start-up founders and external financiers.