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Article
Publication date: 10 August 2012

David Leece, Tony Berry, Jia Miao and Robert Sweeting

The purpose of this paper is to identify the key characteristics of the postinvestment relationship between the venture capital firm and its investee companies.

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Abstract

Purpose

The purpose of this paper is to identify the key characteristics of the postinvestment relationship between the venture capital firm and its investee companies.

Design/methodology/approach

The research is a case study of a major UK venture capital firm using qualitative research to determine the key characteristics of the postinvestment relationship. The study is based on interviews with parties on both sides of the relationship.

Findings

While the results reflect the findings of the entrepreneurship and venture capital literature they also point to the importance of network growth and development for organizational learning in the venture capital industry, professionalization of investee firms and as a context in which the selection of the entrepreneur and the post investment relationship are set.

Research limitations/implications

The research has the limitation of most case studies that the results cannot readily be generalized, in this case to the wider population of venture capital firms. Confidentiality issues also limited the extent to which a longitudinal study could be conducted.

Practical implications

A better understanding of the postinvestment relationship can inform entrepreneurs in their pitch for funds and in their anticipation of the post investment relationship. This understanding can also assist venture capital firms in the management of this relationship.

Originality/value

The case study uses data from rare access to a venture capital firm. It also differs by interviewing both parties to the postinvestment relationship, that is venture capitalist and investee firm.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 18 no. 5
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 23 October 2023

Alexander (Degreat) Narh Tetteh, Qingxiong (Derek) Weng, Lincoln Jisuvei Sungu and Magdalene Zeinab Akosua Adams

The aim of this study is to understand the levels (i.e. mild vs intense) of task conflict (TC) expressions between angel investors and entrepreneurs at the post-investment stage…

Abstract

Purpose

The aim of this study is to understand the levels (i.e. mild vs intense) of task conflict (TC) expressions between angel investors and entrepreneurs at the post-investment stage and how it affect angel investors’ follow-on investment intentions with the same entrepreneur.

Design/methodology/approach

Survey data was gathered from 71 angel investors in China. Mplus was used to test the proposed research model.

Findings

This study found that angels perceive affective conflict (AC) when engaged in intense TC, unlike the case for mild TC expressions. Furthermore, the analysis shows that, unlike mild TC expressions, intense TC expressions impede angels’ reinvestment intentions when they perceive ACs. Other results indicate that when angels perceive that entrepreneurs are not open to coaching, the prominence of mild TC expression is sharply mitigated and becomes as detrimental as intense TC expressions.

Research limitations/implications

This study only focused on one specific aspect of the angel–entrepreneur post-investment relationship: The effect of their TC expressions on angels’ reinvestment intentions. By no means do the authors imply that TC expression in the angel–entrepreneur post-investment relationship is the only factor that matters to angel investors in their follow-on investment intentions with the same entrepreneur.

Practical implications

The findings suggest that entrepreneurs should pay careful attention to TC that may arise between them and their financiers. TCs are not entirely detrimental, but their negative effect might depend on how they are expressed. An appropriate level of TC may also improve enterprise performance and collaboration. Thus, angels and entrepreneurs should set clear goals and performance standards, where task interactions mainly focus on the goals and expected outcomes.

Originality/value

Prior to this study, little was known about whether all TCs potentially lead to ACs. By distinguishing between levels (i.e. mild vs intense) of TC expressions between angels and entrepreneurs, this study adds a novel aspect to it by showing that TC, in and of itself, does not necessarily lead to AC but can lead to AC once its intensity grows.

Details

International Journal of Conflict Management, vol. 35 no. 2
Type: Research Article
ISSN: 1044-4068

Keywords

Article
Publication date: 12 July 2011

Chiu‐Han Wang and Sejin Ha

Built on De Wulf et al.'s relationship exchange model, the present study aims to examine store attributes as a signal for the process of customer‐retailer relationship building in…

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Abstract

Purpose

Built on De Wulf et al.'s relationship exchange model, the present study aims to examine store attributes as a signal for the process of customer‐retailer relationship building in the context of department store operation in the USA.

Design/methodology/approach

A sample of college students at a US university participated in an online self‐administered survey. Exploratory factor analysis identified store attribute factors pertaining to department stores and structural equation modeling tested hypotheses.

Findings

Six store attributes relevant to department store environments were found: post‐transaction service, direct mail, interpersonal communication, merchandise, preferential treatment, and store atmosphere. Four store attributes (direct mail, interpersonal communication, merchandise, and preferential treatment) involve perceived relationship investment, while one store attribute dimension (store atmosphere) directly contributes to perceived relationship quality. Perceived relationship investment positively influences perceived relationship quality, which in turn influences behavioural and attitudinal loyalty intentions. The mediating effects of perceived relationship quality on the perceived relationship investment‐loyalty intention links were confirmed.

Research limitations/implications

The single retail setting and student sample are limitations. Future research should examine store attribute dimensions in different retail and/or service operation settings with more diverse populations.

Originality/value

The current study demonstrated that store attributes (direct mail, interpersonal communication, merchandise, and preferential treatment) promote customer‐retailer relationship building as relationship‐inducing factors in the department store context.

Details

Journal of Fashion Marketing and Management: An International Journal, vol. 15 no. 3
Type: Research Article
ISSN: 1361-2026

Keywords

Article
Publication date: 1 December 1995

Kevin McNally

The availability of external equity finance is a key factor in thedevelopment of technology‐based firms (TBFs). However, although a widevariety of sources are potentially…

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Abstract

The availability of external equity finance is a key factor in the development of technology‐based firms (TBFs). However, although a wide variety of sources are potentially available, many firms encounter difficulties in securing funding. The venture capital community, particularly in the UK, has done little to finance early stage TBFs and has failed to cater adequately for the specific value‐added requirements of these firms. Non‐financial companies have the potential to become an important alternative source of equity finance for TBFs through the process of corporate venture capital (CVC) investment. Based on a telephone survey of 48 UK TBFs that have raised CVC, examines the role of CVC in the context of TBF equity financing. Shows that CVC finance has represented a significant proportion of the total external equity raised by the survey firms and has been particularly important during the early stages of firm development. In addition, CVC often provides investee firms with value‐added benefits, primarily in the form of technical‐ and marketing‐related nurturing and credibility in the marketplace. Concludes with implications for TBFs, large companies, venture capital fund managers and policy makers.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 1 no. 3
Type: Research Article
ISSN: 1355-2554

Keywords

Article
Publication date: 30 June 2022

Jinbo Wang, Maosheng Ran and Yi Li

This study aims to investigate the impact of venture capital (VC) involvement on investment efficiency (IE) and its potential action mechanisms from the perspective of financial…

Abstract

Purpose

This study aims to investigate the impact of venture capital (VC) involvement on investment efficiency (IE) and its potential action mechanisms from the perspective of financial resource allocation.

Design/methodology/approach

Using data of Chinese firms between 2008 and 2020, and the propensity score matching–difference in differences method, the authors investigate the relationship between VC and IE.

Findings

The results show that VC involvement significantly promotes IE, and the effect exhibits an inverted U-shape dynamic over time. The authors find two mechanisms through which VC promotes IE: alleviating financing constraints and improving corporate governance. Supplementary tests indicate that VC institutions with high reputations play a significant role in enhancing IE; the promotion effect is more pronounced for firms in non-high-tech industries, firms facing higher industrial competition and firms located in areas with better property rights protection systems.

Originality/value

This study provides several original contributions. First, based on principal–agent and financing constraint theories, this study enhances the literature by revealing how VC drives the IE of newly public firms in China. Second, to the best of the authors’ knowledge, this is the first attempt to identify the mechanisms between VC and IE; Third, from an empirical perspective, besides discussing the average and dynamic effect of VC on IE, this study also explores the impact of the interaction between VC and market competition and property rights protection on IE.

Details

Chinese Management Studies, vol. 17 no. 4
Type: Research Article
ISSN: 1750-614X

Keywords

Article
Publication date: 15 February 2016

Swati Panda and Shridhar Dash

Maintaining cooperation and avoiding opportunism is essential for a healthy venture capitalist (VC) – entrepreneur relationship. Therefore, the purpose of this paper is to explore…

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Abstract

Purpose

Maintaining cooperation and avoiding opportunism is essential for a healthy venture capitalist (VC) – entrepreneur relationship. Therefore, the purpose of this paper is to explore the role of control and trust for developing a cooperative VC-entrepreneur relationship in an agency environment in the Indian context.

Design/methodology/approach

The study adopts a multiple case study approach to investigate ten VC-entrepreneur dyads. It uses data collected from both primary and secondary sources. Content analysis was used as the data treatment technique.

Findings

The empirical evidence indicates that VC-entrepreneur relationships emerging in the early stages suffer from low agency risks and use more of relational mechanisms to curb opportunism and develop cooperation while relationships at an advanced stage suffer from higher agency risks and employ more of control mechanisms to address it.

Practical implications

The findings can be utilized to enhance cooperation in VC-entrepreneur relationship by identifying the appropriate context to apply relational or control mechanisms, which would eventually lead to better performance of the venture.

Originality/value

This distinction results in the development of a theoretical model which shows how the dual governance mechanisms of control and trust interact with one another to affect confidence in partner cooperation as an entrepreneurial venture raises multiple rounds of venture capital across various stages. The data collected from Indian VC-entrepreneur dyads offers a rich description of the relationship dynamics across the Indian entrepreneurial ecosystem.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 1
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 1 April 1992

Vance H. Fried and Robert D. Hisrich

Venture capital is a major source of financing for entrepreneurial businesses. Given the importance of venture capital financing to venture creation and regional economic…

Abstract

Venture capital is a major source of financing for entrepreneurial businesses. Given the importance of venture capital financing to venture creation and regional economic development, it is not surprising that venture capital has emerged as a topic of interest to entrepreneurs and public policy makers, as well as a subject of some academic research. This research has mainly focused on the composition of venture capital fund portfolios, decision‐making criteria used by venture capitalists, and the postinvestment role of the venture capitalists. The role of the investor in the venture capital fund — the people whose money fuels the entire process — has been largely ignored (Fried & Hisrich, 1988).

Details

Management Research News, vol. 15 no. 4
Type: Research Article
ISSN: 0140-9174

Book part
Publication date: 10 November 2016

William Scheela

This chapter focuses on the impact that private-equity financing has on nurturing and developing global entrepreneurs in emerging economies. The research question is: how do…

Abstract

This chapter focuses on the impact that private-equity financing has on nurturing and developing global entrepreneurs in emerging economies. The research question is: how do potentially high-impact entrepreneurial start-ups in emerging economies rapidly expand globally in order to compete with developed-country competitors. Oviatt’s and McDougall’s (1994, 2005) international new venture typology is used to analyze a case study of an emerging-economy, born-global start-up and its relationship with a venture capital firm, which is crucial to develop a competitive international business strategy.

In spite of operating in an emerging country lacking a well-developed entrepreneurial ecosystem (institutional void), a global start-up in conjunction with a venture capital firm that practiced a hands-on investment strategy, was able to successfully scale its business model globally over a 10-year period. The venture capital firm played a critical role in providing institutional support, lacking in this emerging country, to enable the start-up to quickly grow and become competitive with Western competitors.

Details

Global Entrepreneurship: Past, Present & Future
Type: Book
ISBN: 978-1-78635-483-9

Keywords

Article
Publication date: 1 May 1992

Ken Robbie and Gordon Murray

As the venture capital industry matures and competition increases,understanding the processes by which entrepreneurs select venturecapitalists will become increasingly important…

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Abstract

As the venture capital industry matures and competition increases, understanding the processes by which entrepreneurs select venture capitalists will become increasingly important. Empirical work suggests that awareness of venture capital firms is still low and that the specialist financial and legal advisers have an important role to play in guiding the flow of proposals to venture capitalists.

Details

International Journal of Bank Marketing, vol. 10 no. 5
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 18 January 2016

Romeo V. Turcan and Norman M. Fraser

The purpose of this paper is to explore the process of legitimation of international new ventures (INVs) from an emerging economy and the effect such ventures have on the process…

Abstract

Purpose

The purpose of this paper is to explore the process of legitimation of international new ventures (INVs) from an emerging economy and the effect such ventures have on the process of creation and legitimation of a new industry in that economy.

Design/methodology/approach

It is a longitudinal ethnographic case study. Following an inductive theory building approach, data were collected over an 11-year period via in-depth interviews, participant observations and unobtrusive data.

Findings

Data reveal three different contexts in which legitimation takes place: legitimation of the new industry and of the new venture domestically and internationally. A new venture drives the process of industry legitimation by achieving legitimacy threshold first nationally at meso and micro levels as well as internationally. The challenge therefore for such a venture is to establish legitimacy in the absence of any precedents at the organization, industry or international levels. Unless at least one new venture achieves legitimacy threshold in a new industry there is no possibility for that industry to become institutionalized.

Research limitations/implications

The authors advocate for further research at the intersection between legitimation, international entrepreneurship and emerging markets in order to further advance the emergent theory.

Practical implications

The data suggest that in order for an INV to achieve cognitive legitimacy and socio-political legitimacy in an emerging industry located in an emerging economy, and successfully internationalize, it shall design a robust business model targeting both internal and external stakeholders; engage in persuasive argumentation invoking familiar cues and scripts; engage in political negotiations promoting and defending incentive and operating mechanisms; and overcome the country-of-origin effect by pursuing technology legitimation strategy.

Social implications

Governments and NGOs may wish to see new industries emerge but they lack the means and mandate to establish and lead them themselves, instead rely on enabling actions, such as investment in capacity building. However, building capacity for an as-yet non-existent industry in an emerging economy may prove to be counter-productive, driving a brain drain of qualified workers who are forced to migrate to find suitable work. The work leads the authors to speculate about whether there may be a role for investment in programs of industry legitimacy building in pursuit of public policy objectives.

Originality/value

The study puts forward a process model of new industry legitimation. The model theorizes the process of change from an initial condition in which an industry does not exist to a final condition in which it is institutionalized. The model addresses the case where the initial catalyst is the formation of an INV that is the seed for the birth of the industry. Since both the new venture and the new industry lack cognitive and socio-political legitimacies, the model theorizes temporal emergence of these at organizational and industry levels, leading ultimately to institutionalization.

Details

International Journal of Emerging Markets, vol. 11 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

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