Path Dependence in New Ventures’ Capital Structures

We explore new ventures’ capital structures, providing novel theoretical reasoning concerning path dependence. We examine a longitudinal sample of 1,756 Swedish startups and their use of external financing. We find support for path dependence in new ventures’ financial structures in that their early funding choices of subsidies, debt or equity, persist over time, with the strongest path effect for equity. In line with theory, those ventures who replace their CEO are more likely to change capital structures. Our study adds to the stream of research providing alternative explanations to prevailing theories of the evolution of new ventures’ financing structures.