Empirically found outcomes and current literature

Empirically, in my overarching case and cases-within-a-case, I find that every instance of bootstrapping exchange can be seen as an instance of relational contracting, and, thus, all of the bootstrapping behaviors are conditioned upon entrepreneur-stakeholder relationships. In Chapter 5, I presented my argumentation as to why even bootstrapping instances that do not explicitly involve external stakeholders are implicit relational contracts. Moreover, in my data I found that not all of the bootstrapping behaviors are optimal, or even acceptable, for an entrepreneur who bootstraps extensively over prolonged periods. For instance, my case entrepreneur shares that

delaying payments is neither an acceptable industry practice, nor an ethical way to contract for bootstrap resources, as these behaviors are essentially harmful to the relationships with stakeholders. Consequently, the cross-case findings in Figure 12 present only relationship-oriented bootstrapping behaviors. My empirical conclusions represent the particular instances of entrepreneur-stakeholder cooperation, and, thus, the subsequent change in conditions for bootstrapping and outcomes that are likely to occur.

One of my key arguments for need to conceptually develop bootstrapping knowledge was to address the divergent understanding of bootstrapping’s outcomes in the existing literature (see Chapters 1 and 2). Based on my study’s findings, it is possible to achieve conceptual understanding of outcomes as conditions continuously produced as a consequence of resource needs being addressed through bootstrapping behaviors over time. Below, I will relate my findings to prominent examples of literature discussing bootstrapping’s role and implications.

Patel et al. (2011) find that decreasing financial returns in new firms may result in limited scalability and increased costs of reduced legitimacy towards external stakeholders. The authors attribute the limited scalability and reduced legitimacy to overreliance on bootstrapping in the cooperation between the entrepreneur and resource-providing stakeholders, and propose the diversity of stakeholders as a mitigating factor to reduce the negative outcomes. The authors speak of decreasing returns of bootstrapping over time and stakeholder diversification as a way to hamper the decrease in returns. To the extent the outcomes are perceived as gradually emerging – for instance, scalability challenges arising as a result of legitimizing process – my findings confirm the conclusions of Patel et al. (2011). However, it is necessary to note that the authors quantitatively study a large sample of firms and use the economics measures of outcomes – such as a firm’s cashflow position, equity distribution, need for direct financial investment, and so on. Such measurements are only marginally applicable to determining the success of new firms, as the latest entrepreneurship research indicates (see Chapters 1 and 2). In practice, a wide diversity of stakeholders willing to provide resources for free or at a low cost is rarely available to entrepreneurs at the early stage of the firm’s development. Bootstrapping research has not yet seen empirical studies on bootstrapping’s outcomes that would consider this limitation. My study assumes the limited pool of resource-providing stakeholders within the industry network, and considers the case of implicit contractual relationship with one stakeholder at a time in order to achieve the purposes of one defined development milestone. I find that, while the possibilities of diversifying stakeholders might increase with time, this should with more likelihood happen provided that the outcomes at earlier development stages are successfully managed. In practice, the efforts to diversify

the stakeholders “too early” can be seen by the entrepreneur as an additional cost, which is to a large degree responsible for arising scalability and prioritizing challenges.

The study by Ebben and Johnson (2006) focused on resources scalability, concluding that bootstrap resources are scattered, sporadically available, and not reliable over time.

This is in line with my above argumentation regarding the perceived cost of diversification of bootstrap resource providers. In line with my findings, Ebben and Johnson conclude that bootstrapping techniques preferred and used by entrepreneurs change over the firm’s development. However, they omit the point that as bootstrapping behaviors change, so do the outcomes. The authors assume the organizational theory perspective and presumed stakeholders’ diversity, and thus the possibility of the entrepreneur being able to make a conscious, calculated choice of techniques, for instance, in the pecking order manner. Leveraging the quantitatively substantial base of involved stakeholders is seen as a possibility for diversifying the risks, improving legitimacy, and accessing traditional financing sooner. In a small firm’s reality, my study demonstrates, the natural step to handling legitimacy challenges and achieving sustainably sufficient resources is taking care of existing relationships by adapting the norms and conditions to each particular stage of cooperation, rather than diversifying the stakeholders and adapting bootstrapping behaviors per se.

In contrast to the perceived resource diversity perspective assumed by the above studies, Grichnik et al. (2014) examine the condition of environmental scarcity and the role of human and social resources in overcoming it. The study’s findings emphasized the costs of resource acquisition through bootstrapping, associated with a new firm’s dependency on human and social resources, and concluded that the relationship between bootstrapping behaviors and new firm growth over time represents an inverted U shape – the longer the entrepreneur relies on such resources, the more this reliance is likely to hamper the firm’s growth, although the strong availability of human and social resources is favorable at the start. However, the study does not discuss how the dependency on human and social resources can be managed over time, and how the inverted U curve can continue developing over the coming bootstrapping exchanges.

My study demonstrates that relational contracts for bootstrap resources do not result in negative dependency as the final state of exchange, but that dependency challenges can be addressed through execution of contractual norms, resulting in termination of the relationship or continuation of the relationship at renegotiated terms and conditions. The way in which dependency can be addressed at later stages of entrepreneur-stakeholder cooperation is largely informed by how the legitimacy and scalability challenges were addressed earlier in the cooperation. Thus, it is the process of acquiring, managing, and maintaining the social and human capital that my study emphasizes, and not the instrumental cause and effect perspective on behaviors and outcomes. Some later studies (e.g., Rio Rita, 2020) concluded that bootstrapping and

dependency on resources have a negative relationship – bootstrapping behaviors allow the firm to grow independently on external capital longer, which may appear as contradicting with earlier studies. When it comes to understanding bootstrapping’s role and outcomes, one of the conceptual contributions my study is able to offer is demonstrating that dependency can be managed, through relational contractual norms, to impact the firm – and the subsequent standalone bootstrapping exchanges – in one or the other way.

To summarize, my study’s findings are able to nuance the understanding of various possible outcomes of bootstrapping behaviors as they arise over the course of the entrepreneur-stakeholder relationship. Further, the findings demonstrate how the respective outcomes are managed with the aid of relational contracting norms. As seen in my case data (see Figures 8 and 10), the possible implications on a firm’s legitimacy, finance scalability, dependency on resources and resource providers can be nuanced to more specific outcomes. For instance, for the entrepreneur these are the realization of the high cost of switching resource-providing partners, realization of the need to refocus the limited time on more sustainable sources of income, such as sales, realization of the need to accept traditional financing to avoid bankruptcy, learning to exercise certain contractual norms in a more discrete or more relational manner. For the resource-providing stakeholder, nuanced outcomes are, for instance, learning to manage upcoming similar partnerships in a more discrete fashion, learning to prioritize some contracts over the other, re-evaluating the benefits of informal personal relationships with entrepreneurs, learning to set the price on resource and time investments.

Understanding these outcomes provides insights into building larger implications, including the growth, financial performance, survival, and other categories of outcomes that past research has emphasized.

In the process of developing the nuanced understanding of outcomes, I find, just as previous studies, that legitimacy, scalability, and dependency are critical long-term implications to consider. Additionally, I demonstrate that legitimacy implications are associated with possible limitations on resource pool access, implications for scalability are likely to arise in line with prioritizing challenges for both parties in the cooperation, and whether or not dependency implications will hamper or promote the firm’s further development is likely to be dependent on the handling of challenges associated with power, control, and reciprocity within the specific entrepreneur-stakeholder cooperation.

Conditions for bootstrapping behaviors and the possible outcomes thereof are not static states, but rather are temporally evolving, changing, and consciously or intuitively managed by the exchange parties by means of norms of relational contracting. In the following, concluding chapter, I develop the conceptual understanding of the study’s two research questions, and propose an analytically generalizable conceptual model for

understanding the same or similar phenomena in other situations and contexts.

Chapter 7 will discuss the study’s conclusions, contributions, limitations, and implications for different audiences.