“Start-up Financing in Jordan: The Role of Legitimacy”
Farrah, Malek (2012) “Start-up Financing in Jordan: The Role of Legitimacy”. [Dissertation (University of Nottingham only)] (Unpublished)
New ventures are said to suffer from lack of resources, particularly financial, in their early stage. This is due to the lack of legitimacy which is caused by the liability of newness and smallness. As a result, about 25% of start-up and small firms go bankrupt or fail within two years of establishment while almost 52% disappear within 4 years (Berger & Udill, 1998). Consequently, this study is a response to the fact that existing studies in the area of legitimacy for start-up firms are solely concentrated on Western new ventures. Therefore, this study offers an insight of the symbolic actions taken by new ventures to build their legitimacy and obtain start-up financing in the context of Jordan by employing a case study of Technical Advisers Company. Mixed research methods were employed to conduct this study. Interviews were held with Technical Advisers Company Management team members. In addition, surveys were sent to banks in Jordan to investigate the factors they assess when providing a start-up loan. The findings show that new ventures in Jordan take symbolic actions that are similar to western start-ups with some actions are only practical in the context of Jordan due to the difference in culture. The outcomes also point-out that banks look for financial performance more than the characteristics of the firm and management team. Additionally, banks decision on providing start-up loans is shown to be linked with the religion of the country.
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