Technology-based firms (TBFs), defined as firms whose activities embrace a significant technology component as a major source of competitive advantage, are usually seen as an important source of product and process innovations, new employment creation and export sales growth (Rothwell, 1984; Slatter, 1992; Murray, 1993; 1994a; 1995). They therefore have an important role to play in the emergence of new technology-based sectors of industry (Rothwell and Dodgson, 1994) and in preserving and enhancing the economic competitiveness of established industries (Oakey, 1984; Rothwell, 1984; Slatter, 1992; Duhamel et al., 1994; Keeble, 1994; Segers, 1995). Indeed, Standeven (1993:2) considered it to have become “increasingly apparent that having a strong domestic technology sector is essential to the long-term health of an economy’.
It was recognised in Chapter 2 that for all new firms, finance is a critical factor for success (Roberts, 1991; Sargent and Young, 1991). It was also noted that the requirements of TBFs are distinctive because of the high costs associated with technological product and process development (Manigart and Struyf, 1995). However, a recurring theme throughout this thesis has been the difficulties encountered by small TBFs seeking to raise finance for start-up and growth. In addition to finance, young TBFs require appropriate value-added assistance in the form of technical and marketing related skills and advice. However, few investors possess the necessary knowledge and information (Murray, 1993; 1995; Abbott and Hay, 1995) at a time when TBFs are increasingly seeking value-added investors in order to compete (Roberts, 1991; Bygrave and Timmons, 1992; Deger, 1994; Onians, 1995).
Chapter 4 identified CVC as a valuable alternative source of finance for many firms of a range of sizes and from a broad range of industries. It was found that while indirect CVC investments typically focus on early stage TBFs (confirmed in Chapter 5), direct investments are more likely to be made in later stage companies operating in medium or low tech industries.