How venture capitalists evaluate entrepreneurs’ track records of conflicts in investment decisions

Dados Bibliográficos

ID21620006
AutoresAlexander Narh Tetteh (0000-0002-8378-4984, Shenyang University of Technology), Qingxiong Weng (0000-0002-5426-6029, Shenyang University of Technology), Magdalene Zeinab Akosua Adams (Shenyang University of Technology)
Ano2025
Volume36
Fascículo4
Páginas778-802
Data de publicação2025-06-23
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoInternational Journal of Conflict Management (JOURNAL)
Identificadores do periódicoISSN: 1044-4068 • E-ISSN: 1758-8545
EditoraEmerald (PUBLISHER)
DOI10.1108/ijcma-08-2024-0199
OpenAlexW4409944299
IdiomaEN
Referências citadas65

Purpose The aim of this study is to understand how venture capitalists (VCs) evaluate an entrepreneur with a track record of conflict with previous investors when making an initial investment decision. Design/methodology/approach This study draws on a conjoint experiment design with 2,064 observations from 129 participants. The data was analyzed using Hierarchical Linear Modeling. Findings This study finds that VCs evaluate entrepreneurs’ track records of conflicts conjointly to minimize adverse selection and agency risk. Specifically, different types of conflicts have different effects on VCs’ perception of agency risk. Notably, VCs placed significant value on an entrepreneur’s track record of task conflict (TC) when the entrepreneur’s record of relationship conflict (RC) was low. Moreover, an entrepreneur’s TC track record gains prominence when coupled with a successful past venture outcome and a high ethical reputation, as opposed to instances of failure or ethical lapses. Additionally, authors find that VCs’ perception of agency risk associated with an entrepreneur with a track record of RC can be mitigated when the entrepreneur has a record of past venture success and ethical behavior. Research limitations/implications This study only focused on one specific aspect of the entrepreneur’s track record in past ventures: the effect of their track record of conflict with previous investors. By no means do the authors imply that the entrepreneur’s track record of conflict is the only important track record that VCs consider when evaluating entrepreneurs for potential partnerships. Practical implications Although conflicts between investors and investees are perceived to be a normal venture event, entrepreneurs should be aware that their track record of conflict with previous investors may be favorable or unfavorable to other investors. Potential investors will scrutinize the entrepreneurs’ track record of conflict when making investment decisions. Entrepreneurs should be particularly careful about RC and strive to always maintain a high ethical reputation with investors. Also, entrepreneurs should note that past success in ventures can mitigate the investors’ negative perception of the entrepreneurs’ track record of conflict. Originality/value Before this study, little was known about whether an entrepreneur’s track record of conflict positively or negatively influences VCs’ investment decisions. The analysis revealed for the first time how VCs perceive and evaluate an entrepreneur with such a track record. This study shows the conditions under which TC is perceived as functional and dysfunctional, as well as how the negative perception of RC can be mitigated

Behavioral economics · Business · Investment Decisions · Political science · Social venture capital · Venture capital · Computer Science · Corporate Finance and Governance · Entrepreneurship Studies and Influences · Law · Private Equity and Venture Capital · Finance