Financial performance and capital structure dynamics of the high-tech startups in the Baltic region
Abstract
This study examines young fast growing technology startup companies in Baltic region. Employing unique datasets of startups financial accounting data from Lithuania, Latvia and Estonia comparative and correlation analysis between growth, profitability and financial leverage indicators reflects how lifecycle stages influence startups profitability and capital structure. By analysing the development patterns of innovative products, investment phases, and capital structures, the research aims to uncover the strategic choices made by startups at different stages of their lifecycle and the implications of these choices on their financial performance. By comparing startups with other control groups in hi-tech and traditional industries research provides empirical evidence on the unique developmental trajectories of startups which enhances the strategic decision-making capabilities of investors and policymakers by providing a deeper, empirically grounded understanding of how startups differ from other sectors in terms of growth, profitability, and capital structure dynamic.
Keyword : startups, technology, finance, leverage, growth, profitability
How to Cite
Kleponė, D., & Okunevičiūtė Neverauskienė, L. (2025). Financial performance and capital structure dynamics of the high-tech startups in the Baltic region. Business: Theory and Practice, 26(1), 153–161. https://doi.org/10.3846/btp.2025.22184
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Bolton, P., Wang, N., & Yang, J. (2019). Investment under uncertainty with financial constraints. Journal of Economic Theory, 184, Article 104912. https://doi.org/10.1016/j.jet.2019.06.008
Bonanno, G., Ferrando, A., & Rossi, S. P. S. (2023). Do innovation and financial constraints affect the profit efficiency of European enterprises? Eurasian Business Review, 13, 57–86. https://doi.org/10.1007/s40821-022-00226-z
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Cassar, G., & Holmes, S. (2003). Capital structure and financing of SMEs: Australian evidence. Accounting and Finance, 43(2), 123–147. https://doi.org/10.1111/1467-629X.t01-1-00085
Chung, W. Y., Lee, J. G., Seo, J., Kim, J., Jo, Y., & Lee, D. (2022). From whom should ICT startups raise capital? The effect of ownership structure on efficiency in new ICT startups. International Review of Economics and Finance, 82, 82–91. https://doi.org/10.1016/j.iref.2022.06.010
Coleman, S., Cotei, C., & Farhat, J. (2016). The debt-equity financing decisions of U.S. startup firms. Journal of Economics and Finance, 40, 105–126. https://doi.org/10.1007/s12197-014-9293-3
De Haas, R., Sterk, V., & van Horen, N. (2022). Start-up types and macroeconomic performance in Europe (Staff Working Paper No. 986). SSRN. https://doi.org/10.2139/ssrn.4168872
Derrien, F., Mésonnier, J.-S., & Vuillemey, G. (2021). Set-up costs and the financing of young firms (Working papers 792). Banque de France. https://doi.org/10.2139/ssrn.3771327
Edwards, A., & Todtenhaupt, M. (2020). Capital gains taxation and funding for start-ups. Journal of Financial Economics, 138(2), 549–571. https://doi.org/10.1016/j.jfineco.2020.06.009
Ferrucci, E., Guida, R., & Meliciani, V. (2021). Financial constraints and the growth and survival of innovative start-ups: An analysis of Italian firms. European Financial Management, 27(2), 364–386. https://doi.org/10.1111/eufm.12277
Filho, P. C. S., Siluk, J. C. M., de Freitas Michelin, C., Rigo, P. D., Júnior, A. L. N., Rosa, C. B., & da Silva, W. V. (2024). A measurement tool for the competitiveness of startups’ innovation ecosystem. Journal of the Knowledge Economy, 15(2), 8262–8289. https://doi.org/10.1007/s13132-023-01170-7
Frid, C. J., Wyman, D. M., Gartner, W. B., & Hechavarria, D. H. (2016). Low-wealth entrepreneurs and access to external financing. International Journal of Entrepreneurial Behavior & Research, 22(4), 531–555. https://doi.org/10.1108/IJEBR-08-2015-0173
Fuertes-Callén, Y., Cuellar-Fernández, B., & Serrano-Cinca, C. (2022). Predicting startup survival using first years financial statements. Journal of Small Business Management, 60(6), 1314–1350. https://doi.org/10.1080/00472778.2020.1750302
Gabrielsson, M., & Manek Kirpalani, V. H. (2004). Born globals: How to reach new business space rapidly. International Business Review, 13(5), 555–571. https://doi.org/10.1016/j.ibusrev.2004.03.005
Giaretta, E., & Chesini, G. (2021). The determinants of debt financing: The case of fintech start-ups. Journal of Innovation and Knowledge, 6(4), 268–279. https://doi.org/10.1016/j.jik.2021.10.001
Gomezel, A. S. (2022). Firm characteristics, debt maturity structure, and innovation performance of small firms. Dynamic Relationships Management Journal, 11(1), 3–15. https://doi.org/10.17708/DRMJ.2022.v11n01a01
Honjo, Y., Ono, A., & Tsuruta, D. (2024). The effect of physical collateral and personal guarantees on business startups. Journal of Economics and Business, 130, Article 106172. https://doi.org/10.1016/j.jeconbus.2024.106172
Hyun, S., & Lee, H. S. (2022). Positive effects of portfolio financing strategy for startups. Economic Analysis and Policy, 74, 623–633. https://doi.org/10.1016/j.eap.2022.03.017
Kerr, W. R., & Nanda, R. (2010). Banking deregulations, financing-constraints, and firm entry size. Journal of the European Economic Association, 8(2/3), 582–593. https://doi.org/10.1111/j.1542-4774.2010.tb00528.x
Khanna, N., & Mathews, R. D. (2022). Skill versus reliability in venture capital. Journal of Financial Economics, 145(2), 41–63. https://doi.org/10.1016/j.jfineco.2021.07.007
Koed Madsen, T., Rasmussen, E., & Servais, P. (2000). Differences and similarities between born globals and other types of exporters. In A. Yaprak & H. Tutek (Eds.), Globalization, the multinational firm, and emerging economies. Advances in international marketing (Vol. 10, pp. 247–265). Emerald Group Publishing Limited. https://doi.org/10.1016/S1474-7979(00)10013-4
Lang, L., Ofekb, E., & Stulz, R. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40(1), 3–29. https://doi.org/10.1016/0304-405X(95)00842-3
Lietuvos Respublikos Seimas. (2019). Law of the Republic of Lithuania on Small and Medium-sized Business Development (amendment to the 2,8,9 articles). TAR, 2019-06-19, Nr. 9827.
Ling Ng, Y., Theng Lau, W., Ni Soh, W., & Ab Razak, N. H. (2024). Financial constraints to firm growth: The role of firm age in ASEAN–6 countries. Comparative Economic Research. Central and Eastern Europe, 27(1), 93–111. https://doi.org/10.18778/1508-2008.27.05
Manigart, S., & Struyf, C. (1997). Financing high technology startups in Belgium: An explorative study. Small Business Economics, 9, 125–135. https://doi.org/10.1023/A:1007967722346
Mattsson, L.-G., & Andersson, P. (2019). Private-public interaction in public service innovation processes-business model challenges for a start-up EdTech firm. Journal of Business & Industrial Marketing, 34(5), 1106–1118. https://doi.org/10.1108/JBIM-10-2018-0297
Myers, S. C. (1984). Capital structure puzzle. Journal of Finance, 39(3), 575–592. https://doi.org/10.2307/2327916
Newman, A., Gunessee, S., & Hilton, B. (2012). Applicability of financial theories of capital structure to the Chinese cultural context: A study of privately owned SMEs. International Small Business Journal, 30(1), 65–83. https://doi.org/10.1177/0266242610370977
Neville, C., & Lucey, B. M. (2022). Financing Irish high-tech SMEs: The analysis of capital structure. International Review of Financial Analysis, 83, Article 102219. https://doi.org/10.1016/j.irfa.2022.102219
Okunevičiūtė Neverauskienė, L., & Pranskevičiūtė, I. (2021a). Hybridity of social enterprise models and ecosystems. Journal of International Studies, 14(1), 41–59. https://doi.org/10.14254/2071-8330.2021/14-1/3
Okunevičiūtė Neverauskienė, L., Danilevičienė, I., & Rutkauskas, A. V. (2021b). Portfolio of macroeconomic processes as a tool of the country’s economic efficiency management. Transformations in Business and Economics, 20(2), 62–84.
Okunevičiūtė Neverauskienė, L., & Kleponė, D. (2024a). Empirical evidence on the startup growth in the Baltic Region high tech landscape. Transformations in Business & Economics, 23(63A), 1164–1191.
Okunevičiūtė Neverauskienė, L., Ginevičius, R., & Danilevičienė, I. (2024b). The influence of wage and employment on competitiveness: An assessment. Journal of Competitiveness, 16(4), 83–105.
Opuala-Charles, S., Omoke, P. C., & Uche, E. (2023). The dynamic role of financial development in analyzing the N-shaped tourism-led growth hypothesis in Mauritius. Journal of the Knowledge Economy, 14(4), 4903–4928. https://doi.org/10.1007/s13132-022-01048-0
Rajaiya, H. (2023). Innovation success and capital structure. Journal of Corporate Finance, 79, Article 102345. https://doi.org/10.1016/j.jcorpfin.2022.102345
Robb, A. M., & Robinson, D. T. (2014). The capital structure decisions of new firms. The Review of Financial Studies, 27(1), 153–179. https://doi.org/10.1093/rfs/hhs072
Serrasqueiro, Z., Pinto, B., & Sardo, F. (2023). SMEs growth and profitability, productivity and debt relationships. Journal of Economics, Finance and Administrative Science, 28(56), 404–419. https://doi.org/10.1108/JEFAS-01-2022-0018
Somya, S., & Saripalle, M. (2023). The determinants of firm’s growth in the telecommunication services industry: Empirical evidence from India. Journal of Quantitative Economics, 21(1), 193–211. https://doi.org/10.1007/s40953-022-00334-7
Tong, Y., & Saladrigues, R. (2023). The influence of intellectual capital on the financial performance of Spanish new firms. Montenegrin Journal of Economics, 19(2), 179–188. https://doi.org/10.14254/1800-5845/2023.19-2.15
Zhu, X., & Kim, J. (2023). Financial development and innovation: The role of market structure. Journal of Money, Credit and Banking. https://doi.org/10.1111/jmcb.13125
Albuquerque, R., & Hopenhayn, H. A. (2004). Optimal lending contracts and firm dynamics. Review of Economic Studies, 71(2), 285–315. https://doi.org/10.2139/ssrn.273255
Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2016). Financing of working capital requirement, financial flexibility and SME performance. Journal of Business Economics and Management, 17(6), 1189–1204. https://doi.org/10.3846/16111699.2015.1081272
Bolton, P., Wang, N., & Yang, J. (2019). Investment under uncertainty with financial constraints. Journal of Economic Theory, 184, Article 104912. https://doi.org/10.1016/j.jet.2019.06.008
Bonanno, G., Ferrando, A., & Rossi, S. P. S. (2023). Do innovation and financial constraints affect the profit efficiency of European enterprises? Eurasian Business Review, 13, 57–86. https://doi.org/10.1007/s40821-022-00226-z
Cappa, F., Cetrini, G., & Oriani, R. (2020). The impact of corporate strategy on capital structure: Evidence from Italian listed firms. The Quarterly Review of Economics and Finance, 76(C), 379–385. https://doi.org/10.1016/j.qref.2019.09.005
Cassar, G., & Holmes, S. (2003). Capital structure and financing of SMEs: Australian evidence. Accounting and Finance, 43(2), 123–147. https://doi.org/10.1111/1467-629X.t01-1-00085
Chung, W. Y., Lee, J. G., Seo, J., Kim, J., Jo, Y., & Lee, D. (2022). From whom should ICT startups raise capital? The effect of ownership structure on efficiency in new ICT startups. International Review of Economics and Finance, 82, 82–91. https://doi.org/10.1016/j.iref.2022.06.010
Coleman, S., Cotei, C., & Farhat, J. (2016). The debt-equity financing decisions of U.S. startup firms. Journal of Economics and Finance, 40, 105–126. https://doi.org/10.1007/s12197-014-9293-3
De Haas, R., Sterk, V., & van Horen, N. (2022). Start-up types and macroeconomic performance in Europe (Staff Working Paper No. 986). SSRN. https://doi.org/10.2139/ssrn.4168872
Derrien, F., Mésonnier, J.-S., & Vuillemey, G. (2021). Set-up costs and the financing of young firms (Working papers 792). Banque de France. https://doi.org/10.2139/ssrn.3771327
Edwards, A., & Todtenhaupt, M. (2020). Capital gains taxation and funding for start-ups. Journal of Financial Economics, 138(2), 549–571. https://doi.org/10.1016/j.jfineco.2020.06.009
Ferrucci, E., Guida, R., & Meliciani, V. (2021). Financial constraints and the growth and survival of innovative start-ups: An analysis of Italian firms. European Financial Management, 27(2), 364–386. https://doi.org/10.1111/eufm.12277
Filho, P. C. S., Siluk, J. C. M., de Freitas Michelin, C., Rigo, P. D., Júnior, A. L. N., Rosa, C. B., & da Silva, W. V. (2024). A measurement tool for the competitiveness of startups’ innovation ecosystem. Journal of the Knowledge Economy, 15(2), 8262–8289. https://doi.org/10.1007/s13132-023-01170-7
Frid, C. J., Wyman, D. M., Gartner, W. B., & Hechavarria, D. H. (2016). Low-wealth entrepreneurs and access to external financing. International Journal of Entrepreneurial Behavior & Research, 22(4), 531–555. https://doi.org/10.1108/IJEBR-08-2015-0173
Fuertes-Callén, Y., Cuellar-Fernández, B., & Serrano-Cinca, C. (2022). Predicting startup survival using first years financial statements. Journal of Small Business Management, 60(6), 1314–1350. https://doi.org/10.1080/00472778.2020.1750302
Gabrielsson, M., & Manek Kirpalani, V. H. (2004). Born globals: How to reach new business space rapidly. International Business Review, 13(5), 555–571. https://doi.org/10.1016/j.ibusrev.2004.03.005
Giaretta, E., & Chesini, G. (2021). The determinants of debt financing: The case of fintech start-ups. Journal of Innovation and Knowledge, 6(4), 268–279. https://doi.org/10.1016/j.jik.2021.10.001
Gomezel, A. S. (2022). Firm characteristics, debt maturity structure, and innovation performance of small firms. Dynamic Relationships Management Journal, 11(1), 3–15. https://doi.org/10.17708/DRMJ.2022.v11n01a01
Honjo, Y., Ono, A., & Tsuruta, D. (2024). The effect of physical collateral and personal guarantees on business startups. Journal of Economics and Business, 130, Article 106172. https://doi.org/10.1016/j.jeconbus.2024.106172
Hyun, S., & Lee, H. S. (2022). Positive effects of portfolio financing strategy for startups. Economic Analysis and Policy, 74, 623–633. https://doi.org/10.1016/j.eap.2022.03.017
Kerr, W. R., & Nanda, R. (2010). Banking deregulations, financing-constraints, and firm entry size. Journal of the European Economic Association, 8(2/3), 582–593. https://doi.org/10.1111/j.1542-4774.2010.tb00528.x
Khanna, N., & Mathews, R. D. (2022). Skill versus reliability in venture capital. Journal of Financial Economics, 145(2), 41–63. https://doi.org/10.1016/j.jfineco.2021.07.007
Koed Madsen, T., Rasmussen, E., & Servais, P. (2000). Differences and similarities between born globals and other types of exporters. In A. Yaprak & H. Tutek (Eds.), Globalization, the multinational firm, and emerging economies. Advances in international marketing (Vol. 10, pp. 247–265). Emerald Group Publishing Limited. https://doi.org/10.1016/S1474-7979(00)10013-4
Lang, L., Ofekb, E., & Stulz, R. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40(1), 3–29. https://doi.org/10.1016/0304-405X(95)00842-3
Lietuvos Respublikos Seimas. (2019). Law of the Republic of Lithuania on Small and Medium-sized Business Development (amendment to the 2,8,9 articles). TAR, 2019-06-19, Nr. 9827.
Ling Ng, Y., Theng Lau, W., Ni Soh, W., & Ab Razak, N. H. (2024). Financial constraints to firm growth: The role of firm age in ASEAN–6 countries. Comparative Economic Research. Central and Eastern Europe, 27(1), 93–111. https://doi.org/10.18778/1508-2008.27.05
Manigart, S., & Struyf, C. (1997). Financing high technology startups in Belgium: An explorative study. Small Business Economics, 9, 125–135. https://doi.org/10.1023/A:1007967722346
Mattsson, L.-G., & Andersson, P. (2019). Private-public interaction in public service innovation processes-business model challenges for a start-up EdTech firm. Journal of Business & Industrial Marketing, 34(5), 1106–1118. https://doi.org/10.1108/JBIM-10-2018-0297
Myers, S. C. (1984). Capital structure puzzle. Journal of Finance, 39(3), 575–592. https://doi.org/10.2307/2327916
Newman, A., Gunessee, S., & Hilton, B. (2012). Applicability of financial theories of capital structure to the Chinese cultural context: A study of privately owned SMEs. International Small Business Journal, 30(1), 65–83. https://doi.org/10.1177/0266242610370977
Neville, C., & Lucey, B. M. (2022). Financing Irish high-tech SMEs: The analysis of capital structure. International Review of Financial Analysis, 83, Article 102219. https://doi.org/10.1016/j.irfa.2022.102219
Okunevičiūtė Neverauskienė, L., & Pranskevičiūtė, I. (2021a). Hybridity of social enterprise models and ecosystems. Journal of International Studies, 14(1), 41–59. https://doi.org/10.14254/2071-8330.2021/14-1/3
Okunevičiūtė Neverauskienė, L., Danilevičienė, I., & Rutkauskas, A. V. (2021b). Portfolio of macroeconomic processes as a tool of the country’s economic efficiency management. Transformations in Business and Economics, 20(2), 62–84.
Okunevičiūtė Neverauskienė, L., & Kleponė, D. (2024a). Empirical evidence on the startup growth in the Baltic Region high tech landscape. Transformations in Business & Economics, 23(63A), 1164–1191.
Okunevičiūtė Neverauskienė, L., Ginevičius, R., & Danilevičienė, I. (2024b). The influence of wage and employment on competitiveness: An assessment. Journal of Competitiveness, 16(4), 83–105.
Opuala-Charles, S., Omoke, P. C., & Uche, E. (2023). The dynamic role of financial development in analyzing the N-shaped tourism-led growth hypothesis in Mauritius. Journal of the Knowledge Economy, 14(4), 4903–4928. https://doi.org/10.1007/s13132-022-01048-0
Rajaiya, H. (2023). Innovation success and capital structure. Journal of Corporate Finance, 79, Article 102345. https://doi.org/10.1016/j.jcorpfin.2022.102345
Robb, A. M., & Robinson, D. T. (2014). The capital structure decisions of new firms. The Review of Financial Studies, 27(1), 153–179. https://doi.org/10.1093/rfs/hhs072
Serrasqueiro, Z., Pinto, B., & Sardo, F. (2023). SMEs growth and profitability, productivity and debt relationships. Journal of Economics, Finance and Administrative Science, 28(56), 404–419. https://doi.org/10.1108/JEFAS-01-2022-0018
Somya, S., & Saripalle, M. (2023). The determinants of firm’s growth in the telecommunication services industry: Empirical evidence from India. Journal of Quantitative Economics, 21(1), 193–211. https://doi.org/10.1007/s40953-022-00334-7
Tong, Y., & Saladrigues, R. (2023). The influence of intellectual capital on the financial performance of Spanish new firms. Montenegrin Journal of Economics, 19(2), 179–188. https://doi.org/10.14254/1800-5845/2023.19-2.15
Zhu, X., & Kim, J. (2023). Financial development and innovation: The role of market structure. Journal of Money, Credit and Banking. https://doi.org/10.1111/jmcb.13125