What drives gearing in early-stage firms? Evidence from blue economy startups

In the blue economy start-ups play a critical role as they bring innovation, technology, and new business models, driving sustainable growth and development. However, blue start-ups also experience financing constraints and in this research, we evaluate the factors that drive their gearing ratio. Using a comprehensive sample of firms across twenty-seven EU member states between 2013 and 2020, we find a negative link between debt ratio and climatic and ocean disruptions. We also report a positive relationship between asset tangibility and gearing, while regulations have a negative influence on the choice of debt as the preferred mode of financing. Our findings also suggest that blue startups with more private equity, have a lower variation in their capital mix. Finally, the fundamentals play a favorable role to motivate the use of debt financing. These findings have important im-plications for blue start-ups and the related ecosystem.

Automated summary

In the blue economy, start-ups are important for driving sustainable growth and development through innovation and new business models. However, these start-ups face financing constraints. This research examines the factors that influence their gearing ratio and finds that debt ratio is negatively linked to climatic and ocean disruptions, while asset tangibility and regulations have a positive and negative influence, respectively. The presence of private equity reduces the variation in capital mix, and fundamentals motivate the use of debt financing.