Financing of technology-intensive small businesses: Some evidence on the uniqueness of the ICT industry

Using recently collected data on Finnish small businesses, we provide evidence that the debt capacity of growth options, defined as the amount of debt that firms optimally raise for an incremental project, is negative, especially in the information and communications technology (ICT) sector. We relate the finding to the R&D projects that small ICT firms pursue. This may explain why the recent ICT ‘revolution’ relied more on equity than on debt. We run a battery of robustness tests, such as estimating robust regressions, addressing reverse causality and developing a sample selection model for the capital structure choice, to illustrate the robustness of our findings.