Take the money or run? Investors' ethical reputation and entrepreneurs' willingness
By: Drover, Will
Material type:
ArticlePublisher: 2014Description: 723 - 740Subject(s): Conjoint Analysis | Investor Selection | Investor Reputation | Business Ethics | Venture Capital
In:
Journal of Business VenturingSummary: Drawing on the multi-principal-agent perspective, this research models the influence of venture capitalists' reputation for ethical behavior on entrepreneurs' willingness to partner decisions. We test our model using a two-study design. Study one, a conjoint experiment, revealed that explicit knowledge of past unethical behavior negatively affects entrepreneurs' willingness to partner. Interaction effects revealed that factors previously shown to influence the entrepreneurs' evaluations-investor value-add and investment track record-become largely contingent upon and often subjugated by investors' ethical reputation. Study two, a traditional between-subjects scenario experiment, revealed that when entrepreneurs develop their own perceptions about the ethicality of an investor's prior behaviors, the ethical dimension remains highly influential. Further, we find that as the consequences of rejecting funding become more severe (e.g., possible bankruptcy), entrepreneurs become increasingly willing to partner with unethical investors. We also find that high fear of failure entrepreneurs are less willing to partner with unethical investors than their low fear of failure counterparts.
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Ahmedabad (HO) | (Browse shelf) | Vol. 29, Issue. 6 | Available | 018698 |
Drawing on the multi-principal-agent perspective, this research models the influence of venture capitalists' reputation for ethical behavior on entrepreneurs' willingness to partner decisions. We test our model using a two-study design. Study one, a conjoint experiment, revealed that explicit knowledge of past unethical behavior negatively affects entrepreneurs' willingness to partner. Interaction effects revealed that factors previously shown to influence the entrepreneurs' evaluations-investor value-add and investment track record-become largely contingent upon and often subjugated by investors' ethical reputation. Study two, a traditional between-subjects scenario experiment, revealed that when entrepreneurs develop their own perceptions about the ethicality of an investor's prior behaviors, the ethical dimension remains highly influential. Further, we find that as the consequences of rejecting funding become more severe (e.g., possible bankruptcy), entrepreneurs become increasingly willing to partner with unethical investors. We also find that high fear of failure entrepreneurs are less willing to partner with unethical investors than their low fear of failure counterparts.
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