Research On The Entrepreneurial Performance Based On Capital Constraint

More and more entrepreneurial activities promote the economy grow stably and healthily. They flourish market, creat employment, promote technological innovation and transform scientific and technological achievements into pratice.So it is very necessary to study how to facilitate entrepreneurial endeavor, and make the new venture survive and grow up quickly. Fund is a kind of important resource to an enterprise, and the difficulty of financing in SME is the focus of theory study. So there are great theoretical value and practical meaning in the research on how the shortage of financial resource hindering new venture's growth.The paper firstly explains the purpose and significance of this study, sums up the international and domestic relevant research as well as shortcomings, and sets up the research object, research methods and research framework, and points out the direction for the future research.In order to study the impact of capital constraints on entrepreneurial performance, this paper does research on entrepreneurial performance and capital constraint firstly.After summing up the related concepts,this paper puts forward the concepts about performance. According to the needs of this paper, performance is defined as the accomplishments and results of organizations or individuals engaging in some activities. Enterprise performance is defined as all accomplishments achieved by enterprise in a certain period of working to achieve goals.We define entrepreneurial preformance as all kinds of achievements making by entrepreneur through hardworking in order to realize the goals, including all the achievements measured by financial and non-financial indicators. Many factors have effects on entrepreneurial performance. We choose four related theory basis.They are Ecological theory, cognitive theory, resource-based theory and Stratey meeting theory. Ecological theory emphasizes that the differences and changes of environment influnce entrepreneurial performance. Cognitive theory, from the perspective of individual, considers that the different entrepreneurial performance can be explained by entrepreneur's education background, experience, competence, motivation and personal traits. Resource-based theory focuses on internal resources, and describes performance based on the various resources integrated by enterprises. The acquisition and use of resources can affect the entrepreneurial performance. Stratey meeting theory considers that if an enterprise can choose a strategy that fits for environment, this enterprise can achieve good performance.Based on theory analysis, This paper presents a new theoretical framework about factors affecting entrepreneurial performance and a small model about fund. Many scholars have done research on the measurement of performance, and there are some commonly used indicators. In empirical analysis, sholars always choose one or several indicators to measure performance. In this paper, we measure performance in three dimensions, which are growth dimension, profitability dimension and survival dimension.In this paper, we study capital constraint on three steps. Firstly, based on financial growth cycle theory , we analyse the source of fund for new venture.The most source is from internal finance, such as entrepreneur's saving and borrowing money from relatives and friends. It is difficult for entrepreneur to get external finance, so entrepreneurs have to face capital constraint. Secondly, we define the concept and expression of capital constraint according to Simon C. Parker and Mirjam van Praag(2002). It is a question that supply of amount can't satisfy demand of amount. Thirdly, we study the reasons that leads to capital constraint. From demand direction, there are industry, speed of enterprise growth, substitutability of resource and traits of entrepreneurs affecting the demand of fund. The resource and gift of entrepreneur, finance environment, such as banks and venture capital, and special finance environment in our country affect the supply of fund. Through analysing, we confirm that many new ventures face to capital constraint. The focus of this paper is to analyze how the capital constraint affects entrepreneurial performance. We use the resource-based theory and the capital structure theory to explain the impact of capital constraints on the performance. Firstly, fund is a very important resource to new venture. It is especially pivotal for new venture. It is rare, and useful for making use of opportunity, resisting threaten and forming strategy. Fund can also affect the acquisition of other resource. So fund can affect entrepreneurial performance, the shortage of amount can lead to bad performance. Secondly, different sources of fund can lead to different performance according to capital structure theory. We analyse entrepreneur's own fund, debt finance and other equity finance, and explain their impact on performance. Entrepreneur's own fund and venture capital affect performance positively.But the less debt finance is used, the better the performance is. When entrepreneur faces to capital constraint, he will choose the sources of fund actively and passively, both circumstances can affect performance.Based on theoretical analysis, this paper presents two following hypotheses:1.Initial capital constraints of amount can affect entrepreneurial performance. The greater the degree is, the poorer the performance is.2.Different sources of fund, forming different capital structure, can affect different entrepreneurial performance. This paper selects 87 enterprises as the sample of research. Through descriptive statistics, we found that most of enterprises face to capital constraint. Through correlation analysis, we validate the two hypotheses. We find that initial capital constraints significantly hinder entrepreneurial performance;Different sources of fund lead to different performance, the increasing proportion of entrepreneur's own fund can affect performance positively, and the increasing proportion of debt can affect performance negatively.The novelty of this paper lies in:1.Foreign previous research have done empirical analysis about the impact of fund and capital constraint on performance, but don't have theoretical analysis. And the research in our country are resting on the description of Status, and don't analyse the relation between them using statistic method. This paper explains the effect in theory firstly, and do empirical analysis after that. So the research is all-sided.2.Previous research about capital structure focus on big and mature enterprise, not new venture. This paper does research on the impact of different sources of fund in new venture on entrepreneurial performance, So it is a little innovative.