Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research

Burchardt, Jens; Hommel, Ulrich; Kamuriwo, Dzidziso Samuel; Billitteri, Carolina

doi:10.1111/etap.12104

Cited by 58 publications

(46 citation statements)

References 125 publications

(207 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Our study explains why institutional differences (e.g., related to legal standards) may result in substitution or complementarity effects, which is analogous to discussions of the use of contractual covenants in the literature (e.g., Burchardt et al ). We find that signaling mechanisms such as patents and founders' education complement each other.…”

Section: Discussionsupporting

confidence: 63%

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country's Institutional Setting

Bellavitis

Kamuriwo

Hommel

2018

Journal of Small Business Management

Self Cite

View full text Add to dashboard Cite

A venture capitalist (VC) needs to trade off benefits and costs when attempting to mitigate agency problems in their investor‐investee relationship. We argue that signals of ventures complement the VC's capacity to screen and conduct a due diligence during the preinvestment phase, but its attractiveness may diminish in institutional settings supporting greater transparency. Similarly, whereas a VC may opt for contractual covenants to curb potential opportunism by ventures in the postinvestment phase, this may only be effective in settings supportive of shareholder rights enforcement. Using an international sample of VC contracts, our study finds broad support for these conjectures. It delineates theoretical and practical implications for how investors can best deploy their capital in different institutional settings while nurturing their relationships with entrepreneurs.

show abstract

Section: Discussionsupporting

confidence: 63%

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country's Institutional Setting

Bellavitis

Kamuriwo

Hommel

2018

Journal of Small Business Management

Self Cite

View full text Add to dashboard Cite

show abstract

“…Skills Development Skills development increases productivity and competitiveness (Gambin et al, 2009) and virtuous cycle of development (Lerner, 2010) Early stage VC skills and sector specialisms development (Gompers et al, 2009) and recycling of new VC manager talent (Lerner, 2010) Management team development through recruitment, training, mentoring and oversight (Baldock, 2016;Munari & Toschi, 2014) 6. Cleantech Innovation / economic growth Policy promotes cleantech innovation for Climate Change (Owen et al, 2018), raising GDP through vibrant SME jobs, sales, export growth (Lerner, 2010) VC seek early stage innovation with risk/reward potential for financial return (Burchardt et al, 2016), create venture growth, scale-up (Baldock, 2016) Create innovative disruptive cleantech R&D start-ups (Owen et al, 2019), creating jobs, sales and competitive exporting SMEs (Owen et al, 2019) Table 4 clearly demonstrates the overall key to addressing Climate Change in the interdependency of the three main actors studied. Government policy framework can fund and support early stage Cleantech, whilst early stage VC can reduce agency failures (moral hazards and adverse selection) using key skills to select and nurture portfolio ventures, with the ventures developing game changing disruptive green innovations to lower carbon emissions.…”

Section: Adopting a Resource Complementarity Lensmentioning

confidence: 99%

Early Stage Investing in Green SMEs: The Case of the UK

Owen

Lehner

Lyon

et al. 2019

JOFRP

View full text Add to dashboard Cite

How might a Green New Deal be applied to the early stage financing of Cleantechs? Amidst rising interest and adoption of Green New Deals in the US, the paper explores the need for more focused policy to address early stage long horizon financing of Cleantechs. We argue that insufficient focus has been applied to early stage investing into these types of innovative SMEs that could lower CO2 emissions across a range of sectors (including renewable energy, recycling, advanced manufacturing, transport and bio-science). Adopting a resource complementarity lens and borrowing from transaction cost theory, we illustrate and build theory through longitudinal UK case studies. These demonstrate how government policy can scale-up through international collaboration public-private, principally venture capital, co-finance to facilitate cleantech innovation with potentially game changing impacts on reducing CO2 emissions in order to meet the Paris 2015 Climate Change targets.

show abstract

“…It is often assumed that entrepreneurial firms require access to external sources of financing to form and subsequently grow because internal sources are lacking (Carpenter and Petersen, 2002a). However, it is also often assumed that adverse selection and moral hazard problems, combined with a lack of stable cash flows and high-quality collateral, make it extremely challenging, if not impossible, for young entrepreneurial firms to attract external debt and "traditional" bank debt in particular (Berger and Udell, 1998).…”

Section: Challenging Common Wisdom With Respect To "Traditional" Sourmentioning

confidence: 99%

Market Orientation, Growth Strategy, and Firm Performance: The Moderating Effects of External Connections

Filatotchev

Bruton

2016

Manag. Organ. Rev.

View full text Add to dashboard Cite

This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link Dzidziso Samuel KamuriwoCass Business School, City University London, UK Tom VanackerGhent University, Ghent, BelgiumThe authors are listed alphabetically and contributed equally to this research effort.2 AbstractThe proliferation of new sources of entrepreneurial finance potentially makes it easier for ventures to raise capital and grow. To date, entrepreneurial finance literature has developed a rich tradition of research on venture capital and angel finance. However, the emergence of "new" sources of finance, such as crowdfunding, and the limited attention paid to "traditional" debt financing and financial bootstrapping, offer opportunities to explore, from different points of view and theoretical perspectives, the challenges that ventures face. The objective of this SpecialIssue is to explore these new and traditional sources of finance and suggest how these phenomena can extend entrepreneurial finance literature and guide new theory building. This paper outlines the new sources of entrepreneurial finance, and in comparing them with more traditional sources, we propose theoretical and empirical challenges that these new and traditional sources present to entrepreneurship scholars. We also provide a brief summary of papers in the Special Issue and outline promising avenues for future research.3

show abstract

Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research

Cited by 58 publications

References 125 publications

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country's Institutional Setting

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country's Institutional Setting

Early Stage Investing in Green SMEs: The Case of the UK

Market Orientation, Growth Strategy, and Firm Performance: The Moderating Effects of External Connections

Contact Info

Product

Resources

About