Financing Unquoted High-Growth Companies: From Extending

themselves and hence the financial structure will not be valued. While the Modigliani and Miller
theorem does not provide a realistic description of actual finance behavior, it did provide a theoretical
framework for finding reasons why finance matters (Frank and Goyal, 2005). Financial markets are
not perfect and imperfections, such as taxes, bankruptcy costs, agency conflicts and imperfect
information have all been advanced to explain why finance does matter in the value creation process.
Financial decision-making is complex and multidimensional in nature. Most studies focus on at least
one of the following dimensions: (a) the amount of finance raised, (b) type of finance raised, (c) the
source from which finance is raised and (d) dynamics in the finance process. The finance process
relates to the amount, type and source of finance raised across time and how these finance decisions
interrelate 1 . Financial decision-making and the finance process can be studied from different
perspectives. The majority of studies have focused on the finance obtained (i.e. the intersection
between the demand and supply side of the market) and how financial intermediaries make decisions
on whether or not to provide finance (i.e. supply side). Less is known about how entrepreneurs
structure their search for finance (i.e. demand side). Hence, researchers have typically put investors–as
the more established resource-rich firms–in the foreground and put entrepreneurial companies–as the
more passive resource-poor firms–in the background when studying the financing of entrepreneurial
companies (Cassar, 2004; Katila, Rosenberger, and Eisenhardt, 2008).
I will discuss the different dimensions of financial decision-making in more detail below. The goal of
this section is to offer a common frame of reference to the reader. It is beyond the scope of this
section, however, to offer a complete overview of the vast literature on company finance (Harris and
Raviv (1991) and more recently Frank and Goyal (2005) offer a more comprehensive overview of this
literature). Rather, I will focus on the most influential theories in corporate finance that have direct
relevance to the subsequent studies included in this dissertation.
1 I do not focus on financial bootstrap strategies, which include more or less creative techniques that reduce the need for
external finance (Winborg and Landström, 2001). Nevertheless, such techniques may have a significant impact on company
growth. I address the impact of financial bootstrap strategies on startup growth in a paper that is not included in this
dissertation (Manigart, Vanacker, Meuleman and Sels, 2009). It is available upon simple request.
7