Unlocking Startup Funding: The Role of Alliances, Patenting, and Network in Entrepreneurial Support Ecosystems

Abstract

This study explores critical determinants influencing startups' equity financing outcomes, focusing particularly on the roles of strategic alliances, patenting activities, and network dynamics generated within incubators, which constitute a specific form of Entrepreneurial Support Organizations. Leveraging an extensive dataset of 238 startups incubated at European Space Agency Business Incubation Centres (ESA BICs), we apply probit regression and Weibull Accelerated Failure Time (AFT) models. Findings reveal that R&D alliances established during incubation markedly enhance both the likelihood and timing of securing equity investments by effectively signalling innovation capability to investors. Conversely, commercial alliances display negligible impact, underscoring their limited signalling potential in technology-focused environments. Interestingly, patenting activities undertaken during incubation negatively affect equity financing prospects. This intriguingly result contributes to existing debates by highlighting that while patents may initially serve as valuable signals, their influence can diminish over time as information asymmetries decrease. Additionally, this study empirically substantiates the "Bridging Effect", demonstrating that extensive incubators networks significantly promote alliance formation among incubated startups. These insights hold theoretical significance and practical implications for entrepreneurs, incubator managers and policymakers striving to optimize support structures within entrepreneurial ecosystems.