Is Human Capital a Critical Consideration when Determining the Use of Financial Bootstrapping?

Abstract

This study examines the effect of human capital(HC) components on the use of financial bootstrapping (FB) by small and medium-scale enterprises (SMEs) in Sri Lanka. As FB is emerging as a resource-dependent financing strategy for fulfilling the financial constraints experienced by small businesses, it is imperative to explore the potential determinants that affect the choice of FB. This quantitative study followed the deductive approach under the positivist research paradigm. A cross-sectional survey was conducted using a self-administered structured questionnaire covering a random sample of 237 SMEs for data collection. Partial least squares structural equation modelling (PLS-SEM) was employed for data analysis. The findings revealed a significant positive impact of the level of education and managerial experience on the use of FB, complying with the outcomes of prior scholarly work. However, the business training shows an insignificant negative impact providing contradictory empirical evidence. This study suggests the necessity of redesigning existing training programmes carried out by policymakers and diverse bodies facilitating SMEs. And, it further implies that a higher level of education and managerial experience, leads to a, higher potential to employ alternative financing strategies.