Entrepreneurial finance: financing antecedents and SMEs performance

Maria Rio Rita, Sugeng Wahyudi


Various previous research has been conducted on the relationship between a cognitive bias and financing decisions by entrepreneurs. Besides that, it still needs to be examined whether a cognitive bias is related with SMEs performance through company finances. The purpose of this research is to test financing antecedents and SMEs performance. One kind of a creative industry, batik SMEs that are located in Pekalongan, Central Java, Indonesia, are the object of this research. There were 190 respondents chosen from batik entrepreneurs. The holistic testing of this empirical model used structural equation modelling (SEM) with an AMOS program. The research results found that an entrepreneur’s cognitive bias has a significant positive bias towards financing. Meanwhile, entrepreneurial orientation and financing also are proven to have a significant positive influence towards SMEs performance. No entrepreneurial orientation influence was discovered towards SMEs performance. Furthermore, the output analysis revealed there is an indication of a strong relationship between a cognitive bias and entrepreneurial orientation. Therefore, this model can be revised, developed, and retested by considering the agenda of this research to enrich insights in the entrepreneurial finance sphere.


Entrepreneurial finance; entrepreneurial orientation; cognitive bias; performance; SME

Full Text:



Adina-Simona, P. 2013. Performance Indicators for Smes Accesing EU Funds. Analele Universitatii Maritime Constanta, 14, 319-322.

Adomdza, G. K., Åstebro, T. & Yong, K. 2016. Decision Biases and Entrepreneurial Finance. Small Business Economics, 47, 819–834.

Aspinwall, L. G., Sechrist, G. B. & Jones, P. R. 2005. Expect the best and prepare for the worst: Anticipatory coping and preparations for Y2K. Motivation and Emotion, 29, 353-384.

Åstebro, T., Jeffrey, S. A. & Adomdza, G. K. 2007. Inventor perseverance after being told to quit: The role of cognitive biases. Journal of behavioral decision making, 20, 253-272.

Baker, H. K. & Ricciardi, V. 2015. Understanding Behavioral Aspects of Financial Planning and Investing. Journal of Financial Planning, 28, 22-26.

Baker, T. & Nelson, R. E. 2005. Creating something from nothing: Resource construction through entrepreneurial bricolage. Administrative science quarterly, 50, 329-366.

Bazerman, M. H. 2001. Smart Money Decisions: Why You Do what You Do with Money (and how to Change for the Better), University of Texas Press.

Bohner, G. & Dickel, N. 2011. Attitudes and attitude change. Annual review of psychology, 62, 391-417.

Bohner, G., Dykema-Engblade, A., Tindale, R. S. & Meisenhelder, H. 2008. Framing of majority and minority source information in persuasion: When and how “consensus implies correctness”. Social Psychology, 39, 108-116.

Campello, M. 2006. Debt Financing: Does it Boost or Hurt Firm Performance in Product Markets? Journal of Financial Economics, 82, 135-172.

Chen, X.-P., Yao, X. I. N. & Kotha, S. 2009. Entrepreneur Passion and Preparedness in Business Plan Presentations: A Persuasion Analysis of Venture Capitalists' Funding Decisions. Academy of Management Journal, 52, 199-214.

Compte, O. & Postlewaite, A. 2004. Confidence-enhanced performance. American Economic Review, 94, 1536-1557.

Debondt, W., Forbes, W., Hamalainen, P. & Muradoglu, Y. G. 2010. What can Behavioral Finance Teach Us about Finance? Qualitative Research in Financial Markets, 2, 29-36.

Delmar, F. & Shane, S. 2004. Legitimating first: Organizing activities and the survival of new ventures. Journal of Business Venturing, 19, 385-410.

Fatoki, O. 2012. The Impact of Entrepreneurial Orientation on Access to Debt Finance and Performance of Small and Medium Enterprises in South Africa. Journal of Social Science, 32, 121-131.

Hmieleski, K. M. & Baron, R. A. 2009. Entrepreneurs' Optimism and New Venture Performance: A Social Cognitive Perspective. Academy of Management Journal, 52, 473-488.

Kahneman, D., Lovallo, D. & Sibony, O. 2011. Before you make that big decision. Harvard business review, 89, 50-60.

Kapoor, J. R., Dlabay, L. R. & Hughes, R. J. 2015. Personal Finance, New York, McGraw-Hill International Education.

Karadag, H. 2015. Financial Management Challenges in Small and Medium-Sized Enterprises: A Strategic Management Approach. Emerging Markets Journal, 5, 25-40.

Koch, L. T., Kuhn, W., Gruenhagen, M. & Hisrich, R. D. 2010. The ‘Irrelevance of Irrelevance’ in Entrepreneurial Finance: Modeling the Cost of Capital in Start-ups Beyond Modigliani–Miller. Strategic Change: Briefings in Entrepreneurial Finance, 19, 29–43.

Lee, D. Y. & Tsang, E. W. K. 2001. The effects of entrepreneurial personality, background and network activities on venture growth. Journal of management studies, 38, 583-602.

Lee, S. & Persson, P. 2016. Financing from family and friends. The Review of Financial Studies, 29, 2341-2386.

Levander, A., Raccuia, I. & Hamrefors, S. 2001. Entrepreneurial Profiling-stimuli, reaction, action A COGNITIVE APPROACH TO ENTREPRENEURSHIP.

Lumpkin, G. T. & Dess, G. G. 2001. Linking Two Dimensions of Entrepreneurial Orientation to Firm Performance: The Moderating Role of Environment and Industry Life Cycle. Journal of Business Venturing, 16, 429-451.

Mcclelland, D. C. 1961. Entrepreneurial behaviour and Characteristics of entrepreneurs. The achieving society.

Mohammed, U. D., Umar, B. O. & Nzelibe, G. C. O. 2016. Entrepreneurial Orientation, Access to Debt Finance and the Performance of Small and Medium Enterprises in Nigeria. Proceedings of the Multidisciplinary Academic Conference, 77-94.

Nagy, B. G., Pollack, J. M., Rutherford, M. W. & Lohrke, F. T. 2012. The Influence of Entrepreneurs' Credentials and Impression Management Behaviors on Perceptions of New Venture Legitimacy. Entrepreneurship: Theory & Practice, 36, 941-965.

Nofsinger, J. R. & Wang, W. 2011. Determinants of start-up firm external financing worldwide. Journal of Banking and Finance, 35, 2282-2294.

Oranburg, S. C. 2016. 4 - Start-up Financing. Start-Up Creation. Woodhead Publishing.

Ortiz-Walters, R. & Gius, M. 2012. Performance of Newly-Formed Micro Firms: The Role of Capital Financing in Minority-Owned Enterprises. Journal of Developmental Entrepreneurship, 17, 1-22.

Oseifuah, E. K. 2010. Financial literacy and youth entrepreneurship in South Africa. African journal of Economic and management studies, 1, 164-182.

Pollack, J. M., Rutherford, M. W. & Nagy, B. G. 2012. Preparedness and cognitive legitimacy as antecedents of new venture funding in televised business pitches. Entrepreneurship Theory and Practice, 36, 915-939.

Raude, J. M., Wesonga, W. & Wawire, P. 2015. Equity Financing Strategy and the Performance of Small and Medium Enterprises in Kenya. International Journal of Business and Management, 10, 193.

Rezaei, J., Ortt, R. & Scholten, V. 2012. Measuring Entrepreneurship: Expert-Based vs. Data-Based Methodologies. Expert Systems with Applications, 39, 4063-4074.

Rita, M. R., Priyanto, S. H., Andadari, R. K. & Haryanto, J. O. 2018. How entrepreneurs anticipate the future market: An initial approach of a future market anticipation model for small businesses. Journal of Small Business Strategy, 28, 49-65.

Robb, A. M. & Robinson, D. T. 2014. The capital structure decisions of new firms. The Review of Financial Studies, 27, 153-179.

Scheier, M. F., Carver, C. S. & Bridges, M. W. 2001. Optimism, pessimism, and psychological well-being. Optimism and pessimism: Implications for theory, research, and practice, 1, 189-216.

Schwardmann, P. & Van Der Weele, J. J. Deception and self-deception. 2016. Tinbergen Institute Amsterdam and Rotterdam.

Shane, S., Locke, E. A. & Collins, C. J. 2003. Entrepreneurial Motivation Human Resource Management Review, 13, 257-279.

Tang, J., Tang, Z., Marino, L. D., Zhang, Y. & Li, Q. 2008. Exploring an inverted U‐Shape relationship between entrepreneurial orientation and performance in Chinese ventures. Entrepreneurship theory and practice, 32, 219-239.

Van Der Wijst, D. 2012. Financial structure in small business: Theory, tests and applications, Springer Science & Business Media.

Vigneron, L. 2012. Pecking Order Versus Trade Off Theory and the Issue of Debt Constraint Problem? Available at SSRN 2139963.

Wang, C. L. 2008. Entrepreneurial orientation, learning orientation, and firm performance. Entrepreneurship theory and practice, 32, 635-657.

Wise, S. 2013. The impact of financial literacy on new venture survival. International Journal of Business and Management, 8, 30.

Xiao, L. 2011. Financing High-Tech Smes in China: A Three-Stage Model of Business Development. Entrepreneurship and Regional Development, 23, 217-234.

Zhang, S. X. & Cueto, J. 2015. The Study of Bias in Entrepreneurship. Entrepreneurship Theory and Practice, 1-36.

Zott, C. & Huy, Q. N. 2007. How entrepreneurs use symbolic management to acquire resources. Administrative Science Quarterly, 52, 70-105.

DOI: http://dx.doi.org/10.14414/jebav.v21i3.1497


  • There are currently no refbacks.

Copyright (c) 2019 Journal of Economics, Business & Accountancy Ventura

Abstracting & Indexing


Hasil gambar untuk ccbyncsa

Copyright @ 2010 Pusat Penelitian dan Pengabdian Masyarakat Sekolah Tinggi Ilmu Ekonomi (PPPM STIE)