The Framing of Perceptions of Fairness in the Relationship between Venture Capitalists and New Venture Teams

Lowell W. Busenitz, Douglas D. Moesel, James O. Fiet and Jay B. Barney

Entrepreneurship Theory and Practice, 1997, vol. 21, issue 3, 5-22

Abstract: This paper investigates how a variety of conditions in place at the time of first-round funding can frame a new venture team's (NVT) perception of the fairness of its relations with its venture capitalists (VC). It assumes that a team's perception of whether its treatment by its VC is procedurally just will affect a team's receptivity to VC advice. An analysis of data from 116 firms funded by venture capitalists indicated that some governance mechanisms and the background of the venture team significantly framed perceptions of fairness in their relationship. A major finding of this research is that the indiscriminant use of contractual covenants can adversely frame a NVT's perception of how fairly it is treated by its VC, which ultimately could inhibit the former's receptivity to advice. Directions for future research are indicated.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:21:y:1997:i:3:p:5-22

DOI: 10.1177/104225879702100301

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