Fig. 1
Definitions of selected explanatory variables
| Potential determinants | Honjo and Kato (2016) | Cole and Sokolyk (2014) | Lee and Zhang (2011) | Åstebro and Bernhardt (2003) | Lima and Venâncio (2011) |
|---|---|---|---|---|---|
| Employment | Number of employees | Number of employees | |||
| Business sector | Binary variables for construction, manufacturing, ICT wholesale and retail | North American Industry Classification System (NAICS) | NAICS | ||
| Work experience | Owner's work experience (in years) in the same industry | The number of years of the owner's work experience in the same industry | Percentage of owners: with 2–9 years of experience; with 10–19 years of experience; with at least 20 years of work experience | Work experience (in years) | |
| Education | Three binary variables: (1) graduated from high school, (2) college education and (3) university graduate | Variable in the range from 1 to 10, where 1 means less than 9 years of education, and 10 represents education with a doctorate | Three variables - the percentage of owners who graduated from: (1) secondary schools; (2) colleges; (3) have not graduated from college | ||
| Number of owners | Binary variable = 1 when the company has more than one owner | Binary variable = 1 when the company has more than one owner | Number of owners |
Descriptive statistics of the variables used in the study
| Variable | Number of observations | Mean | Standard deviation | Minimum | Maximum |
|---|---|---|---|---|---|
| Survival | 4,928 | 0.81 | 0.39 | 0 | 1 |
| Number of owners | 4,928 | 1.39 | 0.72 | 1 | 10 |
| Employment | 4,823 | 1.68 | 3.83 | 0 | 25 |
| Work experience | 4,665 | 12.42 | 10.40 | 0 | 40 |
| External own equity | 4,928 | 0.06 | 0.24 | 0 | 1 |
| External debt | 4,928 | 0.43 | 0.49 | 0 | 1 |
| Initial capital | 4,908 | 4.26 | 2.79 | 0 | 9 |
| Total debt | 4,919 | 2.99 | 3.15 | 0 | 9 |
| Competitive advantage | 4,858 | 0.65 | 0.48 | 0 | 1 |
| Intellectual property | 4,928 | 0.22 | 0.41 | 0 | 1 |
Variables explaining the impact of the capital structure on the survival of start-ups
| Authors and year of publication | Variable | Definition of the variable | Influence of the variable |
|---|---|---|---|
| Huynh et al. (2012) | Overall debt ratio | Foreign capital to total assets ratio | Negative |
| Honjo and Kato (2016) | Initial capital amount (total finance) | Log of total capital in the first accounting year | Positive |
| Initial own capital | Log of own equity in the first accounting year | No impact | |
| Initial capital ratio | Own equity to total equity in the first accounting year. | Negative | |
| Åstebro and Bernhardt (2003) | Loan | = 1 if the owner took out a commercial loan, in p.p. | Negative |
| Other sources of capital | = 1 if the loan came from sources such as: family, spouse, former owner, in p.p. | Positive | |
| capital value 1 | = 1 if the equity of all owners was between $10,000 and $25,000, in p.p. | Positive | |
| capital value 2 | = 1 if the equity of all owners was at least $25,000, p.p. | Positive | |
| Lee and Zhang (2011) | Formal funds | Capital raised from all types of market financing sources, such as banks and venture capital. | Positive |
| Formal debt | Financing obtained from lending institutions such as banks, non-bank financial intermediaries and the government | Positive | |
| Formal capital | Equity investments from venture capitalists (VCs) and business angels consisting mainly of formal capital | Negative | |
| Nassereddine (2012) | Overall debt ratio | Foreign capital to total assets ratio | Negative |
| Lima and Venâncio (2011) | Start-up capital | Total amount of capital in the first year from the launch (in euros) | Positive |
Characteristics of the survival in the market variable and the explanatory variables
| Variable definition | Frequency | Percentage of observations |
|---|---|---|
| Survival in the market (dependent variable) | ||
| 1- The company survived on the market | 922 | 19 |
| 0- Otherwise | 4,006 | 81 |
| 4,928 | 100 | |
| Explanatory variables for the capital structure: | ||
| Initial capital Own | ||
| 0- No equity financing | 991 | 20 |
| 1- Equity does not exceed $500 | 181 | 4 |
| 2- Equity in the range between $501 and $1,000 | 229 | 5 |
| 3- Equity in the range between $1,001 and $3,000 | 422 | 9 |
| 4- Equity in the range between $3,001 and $5,000 | 419 | 9 |
| 5- Equity in the range between $5,001 and $10,000 | 599 | 12 |
| 6- Equity in the range between $10,001 and $25,000 | 701 | 14 |
| 7- Equity in the range between $25,001 and $100,000 | 890 | 18 |
| 8- Equity in the range between $100,001 and $1,000,000 | 411 | 8 |
| 9- Equity higher than $ 1 million | 65 | 1 |
| 4,908 | 100 | |
| External equity | ||
| 1- If the start-up is financed with external equity | 4,630 | 94 |
| 0- Otherwise | 298 | 6 |
| 4,928 | 100 | |
| Total debt | ||
| 0- No debt financing | 2,231 | 45 |
| 1- Debt does not exceed $500 | 152 | 3 |
| 2- Debt in the range between $501 and $1,000 | 127 | 3 |
| 3- Debt in the range between $1,001 and $3,000 | 321 | 7 |
| 4- Debt in the range between $3,001 and $5,000 | 241 | 5 |
| 5- Debt in the range between $5,001 and $10,000 | 342 | 7 |
| 6- Debt in the range between $10,001 and $25,000 | 422 | 9 |
| 7- Debt in the range between $25,001 and $100,000 | 582 | 12 |
| 8- Debt in the range between $100,001 and $1,000,000 | 435 | 9 |
| 9- Debt higher than $ 1 million | 66 | 1 |
| 4,919 | 100 | |
| External debt | ||
| 1- If the start-up is financed with external debt | 2,823 | 57 |
| 0- Otherwise | 2,105 | 43 |
| 4,928 | 100 | |
Correlation matrix
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1. Survival | 1 | |||||||||
| 2. Number of owners | 0.05 | 1 | ||||||||
| 3. Employment | 0.05 | 0.21 | 1 | |||||||
| 4. Work experience | 0.06 | −0.04 | 0.02 | 1 | ||||||
| 5. External own capital | 0.01 | 0.17 | 0.18 | 0.01 | 1 | |||||
| 6. External debt | 0.04 | 0.08 | 0.20 | 0.00 | 0.07 | 1 | ||||
| 7. Initial own capital | 0.02 | 0.19 | 0.21 | 0.00 | 0.23 | 0.19 | 1 | |||
| 8. Total debt | 0.02 | 0.07 | 0.25 | −0.05 | 0.11 | 0.54 | 0.26 | 1 | ||
| 9. Competitive advantage | 0.04 | 0.06 | 0.10 | 0.03 | 0.04 | 0.06 | 0.13 | 0.07 | 1 | |
| 10. Intellectual property | 0.03 | 0.12 | 0.11 | −0.02 | 0.10 | 0.01 | 0.10 | 0.02 | 0.14 | 1 |
Characteristics of explanatory variables describing human and intellectual capital
| Variable definition | Frequency | Percentage of observations |
|---|---|---|
| Number of owners | ||
| 1 | 3,445 | 70 |
| 2 | 1,168 | 24 |
| 3 | 219 | 4 |
| 4 | 73 | 1 |
| 5 | 10 | 0 |
| 6 | 6 | 0 |
| 7 | 5 | 0 |
| 10 | 2 | 0 |
| 4,928 | 100 | |
| Competitive advantage | ||
| 1- the company has a competitive advantage | 1,719 | 35 |
| 0 - otherwise | 3,139 | 64 |
| 4,858 | 100 | |
| Intellectual property | ||
| 1- if the start-up has proprietary rights | 3,859 | 78 |
| 0 - otherwise | 1,069 | 22 |
| 4,928 | 100 | |
Definitions of the dependent variable and models used in survival rates studies
| Author | Definition of the dependent variable | The econometric model |
|---|---|---|
| Huynh, Petrunia, and Voia (2012) | Probability of start-up company bankruptcy | The hazard model |
| Honjo and Kato (2016) | Probability of start-up company bankruptcy | The hazard model |
| Cole and Sokolyk (2014) | Probability of company bankruptcy of at the end of the year t, (t = 2005–2007) | The hazard model |
| Lee and Zhang (2011) | Firm survival - a binary variable indicating whether the company stayed in business in 2007, i.e., three years after its launch | Probit |
| Åstebro and Bernhardt (2003) | Firm survival that takes the value of 1, if one of the original owners-founders remained the owner for 4 years, or if the company is still in business after 4 years, but in the hands of the new owners, otherwise 0 | Probit |
| Nassereddine (2012) | Firm survival - binary variable equal to 1 if the company is in business (survived) and equal to 0 if it is out of business (dropped out of the market) in 2004, 2005, 2006, 2007, respectively | Probit |
| Lima and Venâncio (2011) | Firm survival - a binary variable that takes the value of 1 if the start-up did go out of business by 2007, and 0 otherwise | Logit |
Model estimation results
| Variables | Model without limits | Model with limits | Partial effects |
|---|---|---|---|
| External own equity | −0.019 (0.19) | ||
| External debt (H1) | 0.193** (0.09) | 0.158** (0.08) | 0.024** |
| Total equity | −0.003 (0.02) | ||
| Total debt | −0.009 (0.02) | ||
| Number of owners | 0.148** (0.06) | 0.145** (0.06) | 0.022** |
| Employment | 0.029** (0.01) | 0.028** (0.01) | 0.004** |
| Professional experience (H2) | 0.015* (0.00) | 0.015* (0.00) | 0.002* |
| Competitive advantage (H3) | 0.153 (0.08) | 0.158** (0.08) | 0.024* |
| Intellectual property (H4) | 0.130*** (0.1) | 0.131** (0.1) | 0.019* |
| Constant | 0.853* (0.12) | 0.835* (0.11) | |
| N number of observations | 4,490 | 4,506 | 4,506 |
| LR statistic | 47.46 | 47.59 | 47.59 |