Funding intellectual-capital-abundant technology development: empirical evidence from the Finnish biotechnology business

This study takes an interdisciplinary approach to answering the questions of whether and how the intellectual capital (IC) of a company is related to its financial structure. To this end, we consecutively apply factor and regression analyses on a sample of 65 small and medium-sized Finnish biotechnology companies. Based on the results, we find that Finns with a well-balanced IC base finance their operations to a larger extent with retained earnings and debt while companies with less well-balanced IC bases revert to other sources of financing, for example, external equity. Utilizing the conventional pecking order theory as a theoretical backdrop on one hand and recent results from its empirical research on the other, we present two alternative rationales behind deviating capital structure choices made by companies with dissimilar IC bases.