The adoption and use of key performance indicators (KPIs) in small and early-stage start- ups: theory development
Start-ups operate in a dog-eat-dog business environment with generally a lot of risk and uncertainty. For start-ups business is an every-day struggle for survival and many of them fail within the early stages. Recent years have witnessed a rise in the research effort devoted to management accounting in start-ups. However, management accounting research has primarily focused on copying concepts from large and established firms to start-ups. It is argued that management accounting simply needs to be interpreted differently for early-stage start-ups, not ignored or deemed irrelevant. This paper seeks to derive a novel theory and develop hypotheses on the idea of adopting and using key performance indicators (KPIs) for decision-making and forecasting in small and early-stage start-ups. It is argued that the founders’ level of education is positively related to the adoption and use of KPIs for decision-making and forecasting. Furthermore, it is argued that founders with a degree in business & management are more likely to adopt and use KPIs than those with an engineering or other degrees. However, founders with a degree in business & management are seen less credible than others prior to venture capitalists investing and that their statements should be taken with a gain of salt and viewed with skepticism.