Confidence in Cooperative Relations Between Entrepreneurs and VCs: The Role of Social and Formal Control Mechanisms

Abstract

This study examines how VCs' strategic and managerial involvement mediates the relationships between social control mechanisms and entrepreneurs' confidence in VCs' cooperation. Based on data collected from 120 Israeli entrepreneurs, the findings indicate that VCs' strategic involvement is found to be positively associated with entrepreneurs' confidence in VCs' cooperation whereas, VCs' managerial involvement is found to be negatively associated with entrepreneurs' confidence in VCs' cooperation. Specifically, it was found that VCs' strategic involvement mediates the positive relationships between shared beliefs and similarities, fairness and justice, entrepreneurs' influence on decision-making and their confidence in VCs' cooperation. VCs' managerial involvement mediates the negative relationships between shared beliefs and similarities and entrepreneurs' confidence in VCs' cooperation. However, contrary to the expectations, VCs' managerial involvement does not mediate the relationships between fairness and justice and entrepreneurs' confidence in VCs cooperation. Furthermore, entrepreneurs' influence on decision-making is found to be positively associated VCs' managerial involvement although this involvement was found to be negatively associated with entrepreneurs' confidence in VCs cooperation. The contributions and limitations of the study findings are further discussed, providing additional directions for research.

Keywords: Entrepreneurship

JEL Classification: M13