In order to reduce the number of variables and to lessen potential multicollinearity problems, TMT, strategy, financial, and industry data were factor analyzed to determine which items could be combined. The varimax factor loadings are presented in Table 1. An eleven factor solution explained 47.3% of the variation among the 30 items. Based upon this factor structure, individual items were multiplied by factor loadings and summed to calculate variables for further analyses. Thus, items highly loaded on each factor were combined to create new variables called technical education (Factor 3), new venture experience (Factor 4), industry experience (Factor 7), finance experience (Factor 8), innovative differentiation (Factor 1), marketing differentiation (Factor 6), low cost (Factor 2), strategic breadth (Factor 5), liquidity (Factor 9), industry performance (Factor 10), and industry technological change (Factor 11). Because focus, debt to equity, ROS, and industry growth did not load significantly on any of the factors, these variables were used alone in further analyses.
Tables 2 and 3 present results of multiple stepwise regressions used to examine factors related to venture capital financing and firm performance. Each model was significant at p<.001. Independent variables in the study explained a substantial percentage of the variation in whether or not ventures were funded by venture capitalists (Model R2=.33), percentage of venture capital ownership (Model R2=.19), sales growth (Model R2=.26) and EPS (Model R2.30). Partial R2s were reported in Tables 2 and 3 in order to assess the relative importance of the independent variables in explaining the dependent variables.
Results in Table 2 indicate that compared to IPO firms without venture capital backing, those with such backing were older (Partial R2=.18; p<.001) and their management teams had higher levels of technical education (Partial R2=.08; p<.001), industry experience (Partial R2=.02; p<.05) and finance experience (Partial R2=.02; p<.05). Furthermore, they participated in industries with higher levels of performance (Partial R2=.01; p<.1), technological change (Partial R2=.01; p<.1) and growth (Partial R2=.01; p<.1). The firm's age at the time of the IPO was the most important variable in distinguishing between funded and unfunded ventures (Partial R2=.18). Management team characteristics were second most important (Partial R2=.12), industry characteristics were only mildly important (Partial R2=.03) and the strategies and financial characteristics of the firms were not significantly related to venture capital funding.
Results in Table 2 also
indicate that venture age was the most important indicator of the
percentage of venture capital ownership (Partial R2=.12;
p<.001), followed by technical education (Partial R2=.05;
p<.001) and industry performance (Partial R2=.02;
p<.05). Firms strategies and financial characteristics
were not significantly related to the percentage of venture
capital funding. The relative importance of independent
variables in explaining percentage of venture capitalist
ownership was the same as indicated above for venture capital
funding. Firm age explained the greatest variance, followed
by TMT background and industry characteristics. As with
venture capital funding, firm strategies and financial
characteristics were not associated with percentage of venture
Results in Table 3 indicate that among the ventures in this sample, sales growth was significantly related to the age of the firm at the time of its IPO (Partial R2=.03; p<.01), technical education (Partial R2=.02; P<.05) and finance experience (Partial R2=.05; p<.001). Sales growth was also significantly related to strategies emphasizing innovative differentiation (Partial R2=.04; p<.01), low cost (Partial R2=.09; p<.001), and strategic breadth (Partial R2=.03; p<.01).
Earnings per share was significantly related to new venture experience (Partial R2=.06; p<.001), technical education (Partial R2=.14; p<.001), and industry experience (Partial R2=.02; p<.05). In addition, earnings per share was influenced by strategies emphasizing strategic breadth (Partial R2=.1; p<.1) and focus (Partial R2=.06; p<.001), and by industry performance (Partial R2=.01; p<.1). Neither performance variable was significantly related to venture capital funding nor percentage of venture capital ownership.
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