Expansion And International Expansion Of Small-To Medium Sized Firms: The Role Of Finance

Small- to medium-sized firms are expected to show international growth at an early stage. Several factors may affect the outcome of initial efforts to expand and internationalize. Our research examines how equity based venture funding affects SME expansion and internationalization. We divide venture capital financing into two categories: incremental financing where firms receive their venture capital funding in portions and lump-sum venture funding where firms receive their funding in one lump-sum. The results show that type of equity based venture capital financing affect expansion and internationalization. Incremental funding appears more appropriate for firms with high growth rates whereas lump-sum financing appears more appropriate for firms that are internationalizing their operations.