Coupling between financing and innovation in a startup: embedded in networks with investors and researchers

Abstract

Innovation may be a basis for starting a business, and financing is typically needed for starting. Innovation and financing may conceivably be negatively related, or be unrelated, or plausibly be beneficially related. These possible scenarios frame the questions: What is the coupling between innovation and financing at inception, and what is the embeddedness of coupling in networks around the entrepreneur, specifically networks with investors and researchers? These questions are addressed with a globally representative sample of entrepreneurs interviewed at inception of their business. Innovation and financing are found to be decoupled, typically; less frequently to be loosely coupled, and rarely to be tightly coupled. Coupling is promoted by networking with both investors and researchers, with additive effects and with a synergy effect. By ascertaining coupling and its embeddedness in networks as a way for building capability in a startup, the study contributes to empirically supported theorizing about capability building.