Exploring the venture capitalist – entrepreneur relationship: evidence from India

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.

Citation

Panda, S. and Dash, S. (2016), "Exploring the venture capitalist – entrepreneur relationship: evidence from India", Journal of Small Business and Enterprise Development, Vol. 23 No. 1, pp. 64-89. https://doi.org/10.1108/JSBED-05-2013-0071