management support and the performance of entrepreneurial start-ups

MANAGEMENT SUPPORT
As fi gure 6 shows, the regression model is highly signifi cant and explains 24.2 percent of
the variance of the output variable. Also in this case, the quality-of-management-support
variable plays an important role. Nevertheless, it is again a diff erent role from that played
in the fi rst two sets of regression models. Th e degree of familiarity of investment managers
with the problems of start-up companies is the dominant variable in this model. Additionally,
an interaction term has a signifi cant coeffi cient: the eff ect of the share of work time
that investment managers dedicate to their portfolio company is increased if the start-up
companies are bigger.
Th e results of the regression analyses support the fi ndings of the correlation analysis and
indicate that the quality of management support has a positive eff ect on the performance
of entrepreneurial start-ups. Th e regression analyses show that for almost all measures of
the quality of management support and for three of the four performance indicators, such
a positive relationship exists. Th us, the fi ndings support hypothesis 1. However, we do not
fi nd any infl uence of founder-team and company-specifi c variables on fi rm performance
apart from interaction eff ects. In addition, the eff ect of the interaction terms is to a large
extent contrary to expectations. We fi nd that management support is even more important
in bigger and older companies and for founders with a background in business administration.
Th erefore, the fi ndings do not support hypotheses 2 and 3.
5 DISCUSSION AND INTERPRETATION
Th e description of our results shows that there is a positive relationship between the
quality of management support off ered by venture capital fi rms and the performance of
entrepreneurial start-ups. Th us, the central hypothesis of this study, hypothesis 1, receives
support from the empirical analysis. Th ese results of the present study confi rm earlier
fi ndings by Sapienza and Timmons (1989a; 1989b), Sapienza (1992) as well as Schefczyk
(2000a; 2000b), who also report a positive eff ect of the management support on the
performance of start-up companies.
Nevertheless, we fi nd a signifi cant relationship only for three of the four performance
measures. We observe an infl uence of diff erent measures of the quality of management
support for the performance indicators “EBITDA in 2001”, “goal achievement 1999-
2001” and “subjective evaluation of the eff ect of management support”. However, for
“earnings growth 1999-2001”, we are not able to obtain signifi cant results. In view of
this lack of results for the latter measure, it can be argued that earnings growth is not a
valid measure of the performance of start-ups, since the size of the earnings growth that
a company is able to realize in a given period of time depends to a great extent on the
performance level that it had reached at the outset of this period. In fact, a company that
enjoyed a relatively high EBITDA level in 1998 might have faced lower growth rates
in the following years but still have shown a higher EBITDA in 2001 compared to a
company that started from very low EBITDA levels in 1998 and achieved higher growth
rates in the following years.
SBR 59 April 2007 138-159 153