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The impact of contracts on trust in entrepreneur–venture capitalist relationships

Strätling, R.; Wijbenga, F.H.; Dietz, G.

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Authors

F.H. Wijbenga

G. Dietz



Abstract

Venture capitalists (VCs) increasingly rely on elaborate formal contracts and incentivization through share ownership to manage their relationships with the entrepreneurial firms in which they invest. This study analyses the impact of a high degree of such ‘neoclassical contracting’ on entrepreneurs’ trust in their VC backers. The results from a sample of 86 Dutch entrepreneurial firms indicate not only that a high degree of neoclassical contracting tends to erode entrepreneurs’ trust in their VCs, but also that the use of more informal, relational contracting fails to moderate the negative association between a strong focus on neoclassical contracts and trust. However, entrepreneurs do welcome some level of monitoring, which highlights the enduring tension between trust and control, and the need for VCs to strike a productive balance.

Citation

Strätling, R., Wijbenga, F., & Dietz, G. (2012). The impact of contracts on trust in entrepreneur–venture capitalist relationships. International Small Business Journal, 30(8), 811-831. https://doi.org/10.1177/0266242610388822

Journal Article Type Article
Online Publication Date Feb 18, 2011
Publication Date Dec 18, 2012
Deposit Date Jan 10, 2012
Publicly Available Date Sep 12, 2017
Journal International Small Business Journal
Print ISSN 0266-2426
Electronic ISSN 1741-2870
Publisher SAGE Publications
Peer Reviewed Peer Reviewed
Volume 30
Issue 8
Pages 811-831
DOI https://doi.org/10.1177/0266242610388822
Public URL https://durham-repository.worktribe.com/output/1522977

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Copyright Statement
Strätling, R., Wijbenga, F.H. and Dietz, G. (2012) 'The impact of contracts on trust in entrepreneur–venture capitalist relationships.', International small business journal., 30 (8). pp. 811-831. © 2011 The Author(s). Reprinted by permission of SAGE Publications.





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