Dispersion of Entrepreneurs’ Power and Venture Performance After Initial VC Investment

Item Type Conference or Workshop Item (Paper)
Abstract

Previous research has debated the consequences of venture capital (VC) entry into ventures. Building on the power literature, this study uses a two-stage model that, first, develops and tests how initial VC investment reduces entrepreneurs’ power structures in new venture boards, and, second, explores how such power dispersion affects venture performance through the mediating role of financial slack resources. We develop the argument that financial slack is the core element indicating how entrepreneurs’ resource discretion changes in VC-funded firms. Our results show that initial VC investment decreases entrepreneurs’ discretion and their power over financial slack resources, which in turn has a negative effect on performance. Our analysis informs our understanding of how venture capitalists introduce governance mechanisms and how these mechanisms can have deleterious effects on venture performance. We discuss our contributions to the larger theoretical discussions about the effects of changing entrepreneurs’ structural power and the determinantal implications of venture capitalists’ standard governance mechanisms on venture performance.

Authors Hess, Manuel; Siren, Charlotta; Wincent, Joakim & Grichnik, Dietmar
Journal or Publication Title Academy of Management Annual Meeting Proceedings
Language English
Subjects business studies
Date 2020
Publisher Academy of Management
Volume Vol. 2020, No. 1
Event Title Academy of Management Annual Meeting (AOM) 2020 "Broadening our Sight"
Event Location Vancouver, British Columbia (CA)
Event Dates 07.-11.08.2020
Publisher DOI https://doi.org/10.5465/AMBPP.2020.13735abstract
Depositing User Prof. Dr. Manuel Hess
Date Deposited 30 Nov 2020 09:49
Last Modified 30 Nov 2020 09:49
URI: https://www.alexandria.unisg.ch/publications/261558

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Citation

Hess, Manuel; Siren, Charlotta; Wincent, Joakim & Grichnik, Dietmar: Dispersion of Entrepreneurs’ Power and Venture Performance After Initial VC Investment. 2020. - Academy of Management Annual Meeting (AOM) 2020 "Broadening our Sight". - Vancouver, British Columbia (CA).

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https://www.alexandria.unisg.ch/id/eprint/261558
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