Mind the gap: public equity as a financing solution for medium-sized enterprises and the influence of national culture

Abstract

PurposeThis research focuses on the demand from medium-sized firms to access public equity as a source of finance. The acceptance of public equity differs strongly between countries, particularly between the United Kingdom and Germany. Therefore, this research aims to identify the impact of national culture on the decision to go public in these two countries.Design/methodology/approachThe theoretical framework builds on the satisficing theory of rationality, the pecking-order theory as well as Hofstede's cultural dimension theory. Using a questionnaire, over 1,000 medium-sized businesses in the United Kingdom and Germany were surveyed.FindingsThe findings demonstrate that British medium-sized firms are more open to using public equity as a source of finance than their German counterparts. The results indicate that national culture not only affects the decision to go public but also has a negative impact on uncertainty avoidance and long-term orientation.Originality/valueThe originality of the research lies in the focus on medium-sized firms and the effects of cultural differences between the United Kingdom and Germany. No previous research has explored how culture influences the decision to go public using a dataset generated from medium-sized firms in the United Kingdom and Germany.