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Mitigating the limited scalability of bootstrapping through strategic alliances to enhance new venture growth

James O. Fiet, PhD P. Patel J. Sohl
International Small Business Journal. July 7, 2011

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Although the benefits of bootstrapping are widely known, decreasing returns to venture growth from this strategy are less understood; falls in returns. Decreasing returns may result from limited scalability and increased costs resulting from reduced legitimacy among stakeholders. Using a sample of high-technology firms, this article tests the non-linear relationship between bootstrapping and venture growth and the moderating effects of alliances on this non-linear relationship. We find that bootstrapping has an inverted-U relationship with venture growth; however, alliance diversity enhances the positive effects of bootstrapping while mitigating its negative effects on venture growth.