Abstract

This study builds theory on how the failure to raise venture capital affects the development of new firms. Our context is a unique type of new firms, university spinouts, which are formed to commercialize intellectual property developed within universities (Shane, 2004). Although university spinouts have provided a strong source of deal flow for venture capitalists (Franklin et al., 2007), most spinouts find it difficult to raise such funding (Binks et al., 2004).

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