Financial Knowledge and the Acquisition of Debt Financing: Implications for Born Globals

This study investigates the relationship between founders’ knowledge of different debt financing mechanisms and their start-up’s ability to attract debt financing. Building on the cognitive psychology literature, we propose that the depth of founders’ debt financing knowledge is positively associated with a start-up’s ability to acquire debt financing while the breadth of their debt financing knowledge is negatively associated with this outcome. Moreover, integrating insights on international entrepreneurship, we argue that these relationships will be more pronounced for born globals than for non-born globals. Analyzing survey data on 1,385 start-ups located in Flanders (Belgium) through a Heckman regression model largely confirms our hypotheses. The results have implications for the entrepreneurial finance and international entrepreneurship literature, and for start-ups and policy makers intending to support them.