Financing of technology-intensive small businesses: some evidence on the uniqueness of the ICT sector

While information and communications technology (ICT) firms are typically subject to the same market forces as other firms, there are some forces, such as network effects, that may be particularly important in determining their financing patterns. We conjecture and provide supporting evidence that these forces increase the equity-dependence of the ICT firms. Using a recently collected small business data from Finland, we find, in particular, that the leverage ratio of ICT firms is more conservative than that of other small businesses. The conservative debt ratios can be linked to the ICT firms' R&D-investments.