Take the money or run? Investors' ethical reputation and entrepreneurs' willingness to partner
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Publication type
FT ranked journal articlePublication Year
2014Journal
Journal of Business VenturingPublication Volume
29Publication Issue
6Publication Begin page
723Publication End page
740Publication Number of pages
18
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Drawing on the multi-principal–agent perspective, this research models the influence of venture capitalists' reputation for ethical behavior on entrepreneurs' willingness to partner decisions. We test our model using a two-study design. Study one, a conjoint experiment, revealed that explicit knowledge of past unethical behavior negatively affects entrepreneurs' willingness to partner. Interaction effects revealed that factors previously shown to influence the entrepreneurs' evaluations—investor value-add and investment track record—become largely contingent upon and often subjugated by investors' ethical reputation. Study two, a traditional between-subjects scenario experiment, revealed that when entrepreneurs develop their own perceptions about the ethicality of an investor's prior behaviors, the ethical dimension remains highly influential. Further, we find that as the consequences of rejecting funding become more severe (e.g., possible bankruptcy), entrepreneurs become increasingly willing to partner with unethical investors. We also find that high fear of failure entrepreneurs are less willing to partner with unethical investors than their low fear of failure counterparts.Keyword
Venture Capital, Business Ethics, Investor Reputation, Investor Selection, Conjoint AnalysisKnowledge Domain/Industry
Entrepreneurshipae974a485f413a2113503eed53cd6c53
10.1016/j.jbusvent.2013.08.004