Issue

Vol 39 No 3 (2024): September

Date Log

Submitted
Jan 21, 2024
Accepted
Jul 12, 2024
Published
Sep 11, 2024
Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Copyright

Upon acceptance of an article, authors transfer copyright to the JIEB as part of a journal publishing agreement, but authors still have the right to share their article for personal use, internal institutional use, and for any use permitted under the CC BY-SA license

Open Access

Articles are freely available to the public without any subscription with permitted reuse. For open access articles, permitted third party (re)use is defined by the following Creative Commons user licenses: Creative Commons Attribution (CC BY-SA).

Do the Characteristics of Startup Founders Matter for Funding Performance?

https://doi.org/10.22146/jieb.v39i3.11841
Rayenda Khresna Brahmana
School of Economics, Finance, and Accounting, Coventry University, Coventry, United Kingdom
Doddy Setiawan
doddy.setiawan@staff.uns.ac.id
Faculty of Economics and Business, Universitas Sebelas Maret, Surakarta, Indonesia
https://orcid.org/0000-0003-0394-0738
Evan Lau
Faculty of Economics and Business, Universiti Malaysia Sarawak, Samarahan, Malaysia
https://orcid.org/0000-0001-9999-5842
Maria Kontesa
Faculty of Economics and Business, Universitas Widya Dharma Pontianak, Pontianak, Indonesia

Corresponding Author(s) : Doddy Setiawan

doddy.setiawan@staff.uns.ac.id

Journal of Indonesian Economy and Business, Vol 39 No 3 (2024): September

Abstract

Introduction/Main Objectives: Based on the upper echelons theory, this research examines the role of startup founders' characteristics on startup funding performance (SFP). This study considers the founder's experience, education, and gender as the characteristics that positively affect the SFP. Background Problems: While academia and industry emphasize the importance of startup funding performance (SFP), the empirical evidence on its determinant has received less attention. Yet, upper echelons theory addresses the importance of a leader's characteristics in increasing the organization's performance. Therefore, the current study focuses on investigating the role of startup founders' characteristics in the SFP. Novelty: The current study proposes the founder's characteristics as the key factor for startup funding. Unlike previous studies, this study utilized a survey design to answer the research question. Additionally, this study is the pioneer for entrepreneurial finance studies in gauging the upper-echelons framework. Research Methods: This research collected information from 228 Indonesian Startups through a survey. The estimation model is estimated using robust cross-sectional OLS regression and logistic regression. For robustness purposes, this study tackles the endogeneity issue by using two-stage least squares (TSLS) and PLS-SEM. Finding/Results: The regression results (including the two-stage least square approach) reveal that education and gender play a significant role in SFP but not experience. Moreover, it shows that higher education would increase a startup's probability of having better funding. Meanwhile, male entrepreneurs have lower funding performance than women entrepreneurs. Conclusion: Our study surmises that the education of the founders is crucial for startup financing in Indonesia. It also shows that the experience of founders has a trivial effect. It supports the upper echelons theory, emphasizing the pivotal role of founders' characteristics in entrepreneurial finance. Policy-wise, focusing on education can enhance startup success while addressing gender disparities is crucial. However, limitations exist, suggesting the need for longitudinal studies and broader sample sizes. Future research could explore managerial abilities and cultural factors, offering fresh insights into the literature.

Keywords

education experience startups founder's characteristics startups funding
Brahmana, R. K., Setiawan, D., Lau, E., & Kontesa, M. (2024). Do the Characteristics of Startup Founders Matter for Funding Performance?. Journal of Indonesian Economy and Business, 39(3), 328 -. https://doi.org/10.22146/jieb.v39i3.11841
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
References
  1. Abebe, M. A., Li, P., Acharya, K., & Daspit, J. J. (2020). The founder chief executive officer: A review of current insights and directions for future research. Corporate Governance: An International Review, 28(6), 406-436. DOI: 10.1111/corg.12348
  2. Ahn, J. M., Minshall, T., & Mortara, L. (2017). Understanding the human side of openness: the fit between open innovation modes and CEO characteristics. R&D Management, 47(5), 727-740. DOI: 10.1111/radm.12264
  3. Ahn, K., Chae, H., Song, J., & Cho, T. S. (2009). The effects of founder-CEO attributes on alliance formation of venture startups: A social network perspective. In 69th Annual Meeting of the Academy of Management, AOM 2009. DOI: 10.5465/ambpp.2009.44257658
  4. Al-Matari, Y. A. (2022). Do the characteristics of the board chairman have an effect on corporate performance? Empirical evidence from Saudi Arabia. Heliyon, e09286. DOI: S2405-8440(22)00574-6
  5. Arteaga, F., Gallarza, M. G., & Gil, I. (2010). A new multiblock PLS based method to estimate causal models: application to the post-consumption behavior in tourism. In Handbook of partial least squares (pp. 141-169). Springer, Berlin, Heidelberg. DOI: 10.1007/978-3-540-32827-8_7
  6. Aryadita, H., Sukoco, B. M., & Lyver, M. (2023). Founders and the success of startups: An integrative review. Cogent Business & Management, 10(3), 2284451. DOI: 10.1080/23311975.2023.2284451
  7. Barroso, C., Carrión, G. C., & Roldán, J. L. (2010). Applying maximum likelihood and PLS on different sample sizes: studies on SERVQUAL model and employee behavior model. In Handbook of partial least squares (pp. 427-447). Springer, Berlin, Heidelberg. DOI:10.1007/978-3-540-32827-8_20
  8. Bouaziz, D., Salhi, B., & Jarboui, A. (2020). CEO characteristics and earnings mana-gement: empirical evidence from France. Journal of Financial Reporting and Accounting, 18(1), 77-110.DOI: 10.1108/JFRA-01-2019-0008
  9. Brahmana, R. K., & Kontesa, M. (2023). 'No Better Fund Without Me!' Do Narcissistic Startup Entrepreneurs Succeed in Venture Funding?. The Journal of Entrepreneurship, 32(3), 638-666. DOI: 10.1177/09713557231210697
  10. Brown, J. D., Earle, J. S., Kim, M. J., & Lee, K. M. (2019). Startups, job creation, and founder characteristics. Industrial and Corporate Change, 28(6), 1637-1672. DOI: 10.1093/icc/dtz030
  11. Brush, C., Edelman, L. F., Manolova, T., & Welter, F. (2019). A gendered look at entrepreneurship ecosystems. Small Business Economics, 53(2), 393-408. DOI: 10.1007/s11187-018-9992-9
  12. Buttner, E. H. (2001). Examining female entrepreneurs' management style: An application of a relational frame. Journal of Business Ethics, 29(3), 253-269. DOI: 10.1023/a:1026460615436
  13. Cho, Y. H., & Lee, J. H. (2018). Entrepreneurial orientation, entrepreneurial education and performance. Asia Pacific Journal of Innovation and Entrepreneurship, 12(2), 124-134. DOI: 10.1108/APJIE-05-2018-0028
  14. Clark, C. (2008). The impact of entrepreneurs' oral' pitch presentation skills on business angels' initial screening investment decisions. Venture capital, 10(3), 257-279. DOI: 10.1080/13691060802151945
  15. Coleman, S., Cotei, C., & Farhat, J. (2016). The debt-equity financing decisions of US startup firms. Journal of Economics and Finance, 40(1), 105-126. DOI: 10.1007/s12197-014-9293-3
  16. Corolleur, C. D., Carrere, M., & Mangematin, V. (2004). Turning scientific and technological human capital into economic capital: the experience of biotech startups in France. Research Policy, 33(4), 631-642. DOI: 10.1016/j.respol.2004.01.009
  17. Cucculelli, M. (2018). Firm age and the probability of product innovation. Do CEO tenure and product tenure matter?. Journal of Evolutionary Economics, 28(1), 153-179. DOI: 10.1007/s00191-017-0542-4
  18. Cumming, D., Walz, U., & Werth, J. C. (2016). Entrepreneurial spawning: experience, education, and exit. Financial Review, 51(4), 507-525. DOI: 10.1111/fire.12109
  19. Dezsö, C. L., & Ross, D. G. (2012). Does female representation in top management improve firm performance? A panel data invest¬tigation. Strategic Management Journal, 33(9), 1072-1089. DOI: 10.1002/smj.1955
  20. Franco, S., Cappa, F., & Pinelli, M. (2021). Founder Education and Startup Funds Raised. IEEE Engineering Management Review, 49(3), 42-48. DOI: 10.1109/EMR.2021.3077966
  21. Gaio, C., Gonçalves, T., & Venâncio, A. (2022). Cash holdings in startups: The role of founder sociodemographic characteristics. Journal of Business Research, 139, 520-528. DOI: 10.1016/j.jbusres.2021.09.046
  22. Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334-343. DOI: 10.5465/amr.2007.24345254
  23. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206. DOI: 10.5465/AMR.1984.4277628
  24. Honoré, F. (2022). Joining forces: How can founding members' prior experience variety and shared experience increase startup survival?. Academy of Management Jour¬nal, 65(1), 248-272. DOI: 10.5465/amj.2018.1386
  25. Jiang, H., & Liu, C. (2020). Economic policy uncertainty, CEO characteristics, and firm R&D expenditure: a Bayesian analysis. Applied Economics, 52(34), 3709-3731. DOI: 10.1080/00036846.2020.1721422
  26. Jiménez, A., Palmero-Cámara, C., González-Santos, M. J., González-Bernal, J., & Jiménez-Eguizábal, J. A. (2015). The impact of educational levels on formal and informal entrepreneurship. BRQ Business Research Quarterly, 18(3), 204-212. DOI: 10.1016/j.brq.2015.02.002
  27. Kanze, D., Huang, L., Conley, M. A., & Higgins, E. T. (2018). We ask men to win and women not to lose: Closing the gender gap in startup funding. Academy of Mana¬gement Journal, 61(2), 586-614. DOI: 10.5465/amj.2016.1215
  28. Kato, M., Okamuro, H., & Honjo, Y. (2015). Does Founders' Human Capital Matter for Innovation? Evidence from J Japanese Startups. Journal of Small Business Mana¬gement, 53(1), 114-128. DOI: 10.1111/jsbm.12094
  29. Kaur, R., & Singh, B. (2019). Do CEO characteristics explain firm performance in India?. Journal of Strategy and Manage¬ment, 12(3), 409-426. DOI: 10.1108/JSMA-02-2019-0027
  30. Kim, B., Kim, H., & Jeon, Y. (2018). Critical success factors of a design startup business. Sustainability, 10(9), 2981. DOI: 2071-1050/10/9/2981
  31. Kontesa, M., Brahmana, R., & Tong, A. H. H. (2021). Narcissistic CEOs and their earnings management. Journal of Management and Governance, 25(1), 223-249. DOI: 10.1007/s10997-020-09506-0
  32. Kontesa, M., Lako, A., & Wendy, W. (2020). Board capital and earnings quality with different controlling shareholders. Accounting Research Journal, 33(4/5), 593-613. DOI: 10.1108/ARJ-01-2020-0017
  33. Lee, S. M., & Lee, B. (2015). Entrepreneur characteristics and the success of venture exit: an analysis of single-founder startups in the US. International Entrepreneurship and Management Journal, 11(4), 891-905. DOI: 10.1007/s11365-014-0324-5
  34. Leszczynska, D., & Chandon, J. L. (2019). Is there still a gender effect on CEO compensation?. The Journal of Management Development, 38(5), 336-356. DOI: 10.1108/JMD-09-2018-0277
  35. Liu, C., & Jiang, H. (2020). Impact of CEO characteristics on firm performance: evidence from China listed firms. Applied Economics Letters, 27(14), 1-5. DOI: 10.1080/13504851.2019.1607965
  36. Manolova, T. S., Brush, C. G., Edelman, L. F., & Elam, A. (2020). Pivoting to stay the course: How women entrepreneurs take advantage of opportunities created by the COVID-19 pandemic. International Small Business Journal, 38(6), 481-491. DOI: 10.1177/0266242620949136
  37. Mazzarol, T., Volery, T., Doss, N., & Thein, V. (1999). Factors influencing small business startups: a comparison with previous research. International Journal of Entrepre¬neurial Behavior & Research. DOI: 10.1108/13552559910274499
  38. Naude, W., Gries, T., Wood, E., & Meintjies, A. (2008). Regional determinants of entrepreneurial startups in a developing country. Entrepreneurship and regional development, 20(2), 111-124. DOI: 10.1080/08985620701631498
  39. Nguyen, P., Rahman, N., & Zhao, R. (2018). CEO characteristics and firm valuation: a quantile regression analysis. Journal of Management & Governance, 22(1), 133-151. DOI: 10.1007/s10997-017-9383-7
  40. Nurhayati, B. D., Kusmantini, T., & Wahyu-ningsih, T. (2021). Antecedents and Implications of Innovation Capability: Empirical Study of Bakpia MSMEs in Yogyakarta. Journal of Indonesian Economy and Business, 36(2), 179-203.
  41. Quas, A., &D’Adda, D. (2018). High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?. Economia e Politica Industriale, 45(3), 311-334. DOI: 10.1007/s40812-018-0094-0
  42. Ramón-Llorens, M. C., García-Meca, E., & Duréndez, A. (2017). Influence of CEO characteristics in family firms international¬lization. International Business Review, 26(4), 786-799. DOI: 10.1016/j.ibusrev.2017.01.007
  43. Reeb, D. M., & Zhao, W. (2013). Director capital and corporate disclosure quality. Journal of Accounting and Public Policy, 32(4), 191-212. DOI: 10.1016/j.jaccpubpol.2012.11.003
  44. Rostiani, R., Paramita, W., Audita, H., Virgosita, R., Budiarto, T., & Purnomo, B. R. (2014). Understanding Social Enterprises in Indonesia: Drivers and Challenges. Journal of Indonesian Economy and Business, 29(2), 183-191.
  45. Saeed, A., & Ziaulhaq, H. M. (2019). The impact of CEO characteristics on the internationalization of SMEs: Evidence from the UK. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l' Administration, 36(3), 322-335. DOI: 10.1002/cjas.1497
  46. Shen, Y., Wallace, D., Reddy, K., & Ramiah, V. (2021). An investigation of CEO characteristics on firm performance. Accounting & Finance. Doi: 10.1111/acfi.12896
  47. Soejono, F., Mendari, A. S., & Rinamurti, M. (2015). Competency, entrepreneur charac¬teristic and business performance: Study of the pempek business in Palembang. Journal of Indonesian Economy and Business, 30(1), 30-41.
  48. Spender, J. C., Corvello, V., Grimaldi, M., & Rippa, P. (2017). Startups and open innovation: a review of the literature. European Journal of Innovation Mana-gement. DOI: 10.1108/EJIM-12-2015-0131
  49. Stucki, T. (2016). How the founders' general and specific human capital drives export activities of startups. Research Policy, 45(5), 1014-1030. DOI: 10.1016/j.respol.2016.02.010
  50. Sundermeier, J., & Kummer, T. (2019). Startup founders' personality attributes in crowdfunding campaigns: The relevance of hubris and charisma in raising seed funding online. In Proceedings of the 52nd Hawaii International Conference on System Sciences (HICSS) (pp. 4476-4482). Association for Information Systems.
  51. Symeonidou, N., & Nicolaou, N. (2018). Resource orchestration in startups: Synchronizing human capital investment, leveraging strategy, and founder startup experience. Strategic Entrepreneurship Journal, 12(2), 194-218. DOI: 10.1002/sej.1269
  52. Tang, S., Nadkarni, S., Wei, L., & Zhang, S. X. (2021). Balancing the yin and yang: TMT gender diversity, psychological safety, and firm ambidextrous strategic orientation in Chinese high-tech SMEs. Academy of Management Journal, 64(5), 1578-1604. DOI: 10.5465/amj.2019.0378
  53. Tenca, F., Croce, A., & Ughetto, E. (2018). Business angels research in entrepreneurial finance: A literature review and a research agenda. Journal of Economic Surveys, 32(5), 1384-1413. DOI: 10.1002/9781119565178.ch7
  54. Velte, P. (2019). Do CEO incentives and characteristics influence corporate social responsibility (CSR) and vice versa? A literature review. Social Responsibility Journal, 16(8), 1293-1323. DOI: 10.1108/SRJ-04-2019-0145
  55. von den Driesch, T., Da Costa, M. E. S., Flatten, T. C., & Brettel, M. (2015). How CEO experience, personality, and network affect firms' dynamic capabilities. European Management Journal, 33(4), 245-256. DOI: 10.1016/j.emj.2015.01.003
  56. Wang, C., & Zhang, C. (2019). Non cognitive ability and wage income. Journal World Economy, 42, 145-169.
  57. Yang, X., Hou, W., & Zhou, W. (2021). Homogamy or Heterogamy: The Effects Of CEO Marriage on Family Firm Perfor-mance. In Academy of Management Proceedings (Vol. 2021, No. 1, p. 12816). Briarcliff Manor, NY 10510: Academy of Management. DOI: 10.5465/AMBPP.2021.132
  58. Zhang, J. (2011). The advantage of experienced startup founders in venture capital acquisi¬tion: evidence from serial entrepreneurs. Small Business Economics, 36(2), 187-208. DOI: 10.1007/s11187-009-9216-4
  59. Zhang, S., Zhang, H., Sargani, G. R., Liu, Q., Tang, J., & Zheng, X. (2022). Non-Cognitive Skills and Farmers' Entrepre-neurial Performance: Evidence from Chinese Family Panel Studies. Agriculture, 12(8), 1143. DOI: 10.3390/agriculture12081143
  60. Zor, U., Linder, S., & Endenich, C. (2019). CEO characteristics and budgeting practices in emerging market SMEs. Journal of Small Business Management, 57(2), 658-678. DOI: 10.1111/jsbm.12438
Read More

Author Biographies

Rayenda Khresna Brahmana, School of Economics, Finance, and Accounting, Coventry University, Coventry, United Kingdom

Rayenda Khresna Brahmana is a lecturer at the School of Economics, Finance, and Accounting, Coventry University. He completed his Ph.D. at Universiti Sains Malaysia. He has published in reputable journals such as Business Strategy and the Environment, International Journal of Finance and Economics, Research in International Business and Finance, Global Finance Journal, and Marine Policy, totaling 78 Scopus documents. His research area is corporate finance, corporate strategy, digital finance, and investment.

Doddy Setiawan, Faculty of Economics and Business, Universitas Sebelas Maret, Surakarta, Indonesia

Doddy Setiawan is a Professor in Financial Accounting at the Department of Accounting, Faculty of Economics and Business, Universitas Sebelas Maret (UNS), Indonesia where he has been a faculty member since 2000. He earned his Bachelor's degree in Accounting at the Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia. He did his Master’s degree in Accounting at Universitas Gadjah Mada, Indonesia. He earned his second master's degree in International Master in Regional Integration (IMRI) at Universiti Malaya, Malaysia. Besides, he completed his Ph.D. from Universiti Sains Malaysia, Malaysia. His research interests lie in the areas of corporate finance, small and medium enterprises, earnings management and disclosures. He has collaborated actively with other researchers from various fields in many research projects. He successfully published many articles in different top tier international journals, such as: Journal of Cleaner Production, Journal of Asian Business Studies, Global Finance Journal, Business Strategy and Development.

Evan Lau, Faculty of Economics and Business, Universiti Malaysia Sarawak, Samarahan, Malaysia

Evan Lau, a Professor at the Faculty of Economics and Business, Universiti Malaysia Sarawak (UNIMAS), holds a Bachelor's, Master's, and Ph.D. in International Economics from Universiti Putra Malaysia. With extensive academic experience, he has served as Deputy Dean for Research and Postgraduate, Director of the Centre for Business, Economics, and Finance Forecasting (BEFfore), and Head of Strategy. Currently, he is the Deputy Dean of Research and Commercialization. Internationally recognized, he has held visiting positions at the University of Cambridge and various Indonesian universities. His research spans international economics, finance, business economics, applied econometrics, and socioeconomics, resulting in 110 journal articles and 92 research papers. As an active researcher, Evan has secured 32 research grants and has supervised 86 postgraduate students, examining 74 postgraduate theses and 145 undergraduate research projects. Evan speaks at numerous international conferences in Indonesia, UAE, Sri Lanka, Italy, India, Philippines, China and Malaysia. He has received numerous accolades, including the Young Researcher Award and Highest-Impact Journal Paper Award. Listed among the Top 9% of economists in Malaysia and ASEAN, and Top 10% in Asia by RePEc, Evan is also an avid runner and traveler, committed to research excellence and academic leadership.

Maria Kontesa, Faculty of Economics and Business, Universitas Widya Dharma Pontianak, Pontianak, Indonesia

Maria Kontesa is an associate professor at the Faculty of Economics & Business, Universitas Widya Dharma Pontianak. She earned her bachelor's, master's, and doctoral degrees from Universitas Tanjungpura. Her research interests lie in the areas of accounting reporting, small business accounting, and disclosure. She has successfully published many articles in top-tier international journals, such as Business Strategy and the Environment, Pacific Accounting Review, Accounting Research Journal, Journal of Management and Governance, Managerial Finance, Marine Policy, and The Journal of Entrepreneurship.

Download this PDF file
PDF
Statistic
Read Counter : 392 Download : 379