Entrepreneurial finance and regional ecosystem emergence

We present a novel framework for studying the evolving role of entrepreneurial finance over the stages of emergence for a regional entrepreneurial ecosystem. Drawing on entrepreneurial ecosystems, entrepreneurial finance, and territorial servitization, we explore how three different finance sources impact firm survival and how they relate to each other during ecosystem emergence. We analyze entrepreneurial firms in one industry and region over 36 years. We find that firm survival is differentially affected by funder type based on the stage of ecosystem emergence. Finance sources also have different interrelations depending on the stage of emergence. Based on our results, we abductively articulate a framework for stage-dependent ecosystem emergence microfoundations. This rectifies contradictory results that examine single sources of finance and use cross-sectional data. Had we not measured the emergence process, the results would have led to markedly different theoretical implications and practical takeaways for entrepreneurial finance and ecosystem emergence. Measuring the stage of ecosystem emergence is key to success in financing start-up firms and developing entrepreneurial ecosystems. Using detailed firm-level data, we present a novel framework for studying entrepreneurial finance within a local entrepreneurial ecosystem over time. Entrepreneurial finance sources, whether public or private, interact with firms differently depending on the stage of entrepreneurial ecosystem emergence, as measured by firm density. We find that funding sources are associated with different rates of firm survival during different stages of ecosystem emergence, with a federal source more important during the nascency stage and venture capital more effective as firm density increases. Our results demonstrate that policymakers and ecosystem champions could make better decisions if finance is considered part of an emergence process.