Mind the gap: Public equity as a financing solution for medium-sized enterprises and the influence of national culture

Koch, Lisa Paula

Abstract

Purpose: SMEs are the backbone of today’s economies. In order to be able to persist sustainably, sufficient access to finance is necessary. However, there is a financing gap for SMEs and traditional bank financing is not sustainable anymore due to ever more constraints. This research proposes the use of public equity to gain funding. However, the acceptance of public equity differs strongly between countries. The United Kingdom and Germany represent two polar extremes of financial behaviour, with the United Kingdom being a typically equity-based and Germany being a typically bank-based country. Therefore, this research aims to identify the impact of national culture on the decision to go public in the United Kingdom and Germany. The theoretical framework builds on the Satisficing Theory of Rationality, the Pecking-Order Theory as well as Hofstede’s Cultural Dimension Theory.

Methodology: Using a mixed methods approach, entrepreneurs have been asked about their financial decision making and their opinion about public equity. Results show that national culture has an impact on the decision to go public, in particular a negative impact of long-term orientation and uncertainty avoidance. Based on that, eight policy guidelines have been determined to promote public equity financing for medium-sized enterprises in both countries.

Findings: This research supports the Satisficing Theory of Rationality and the Pecking-Order Theory and contributes putting them in relation as well as in the context of medium-sized enterprises and the decision to go public. Hofstede’s Cultural Dimension Theory has only partially been supported. This research adds to the literature criticising the model for being not specific enough. The results of this study are of interest not only for entrepreneurs and policymakers, but also provide suggestions for further research on the topic. Therefore, it is relevant for both, a practical and academic audience.

Citation

Koch, L. P. Mind the gap: Public equity as a financing solution for medium-sized enterprises and the influence of national culture. (Thesis). Edinburgh Napier University. Retrieved from http://researchrepository.napier.ac.uk/Output/2813187

• Thesis Type: Thesis
• Deposit Date: Oct 15, 2021
• Publicly Available Date: Oct 15, 2021
• DOI: https://doi.org/10.17869/enu.2021.2813187
• Public URL: http://researchrepository.napier.ac.uk/Output/2813187
• Award Date: Jul 31, 2021