Entrepreneurial Finance and Sustainability of Nascent Firms

Abstract

The sustainability challenges of nascent firms in developing economies were a motivation for this study. Hence, a direct effect of entrepreneurial finance on nascent firms’ sustainability was investigated. The study proposed an integrative model that accounts for innovation capability and government support, as mechanisms in explaining the entrepreneurial finance and sustainability nexus. Data collection was with questionnaire from a sample set of 235 nascent entrepreneurs. Structural equation model with the aid of SmartPLS was used for the data analysis. The study found that entrepreneurial finance, innovation capability and government support all have a direct positive effect on nascent firms’ sustainability. Innovation capability, in contrast, partially mediates the relation between entrepreneurial finance and sustainability. However, the study failed to account for a conditional effect of government support on the indirect effect of innovation capability on nascent firms’ sustainability. The study validates the resource dependence theory as a theoretical lens and highlights the fundamental issues that drive sustainability as it relates to new-born firms, most especially from an emerging economy perspective.