16 research outputs found
Commentary: A Framework for Managing the Familiness and Agency Advantages in Family Firms
Advice and monitoring in venture finance
This paper provides empirical insight into the role of contracts and legal systems for managing investorâinvestee relationships along two dimensions: providing advice and addressing conflict. We examine a new detailed dataset from European venture capital (VC) funds. We match very specific contractual terms in VC contracts with the effort (total time spent) and advice that VCs provide to their entrepreneurial investee firms. We also analyze VCâentrepreneur conflicts. We compare the importance of contractual versus non-contractual governance mechanisms, as well as the role of legal systems in different countries for facilitating VCâentrepreneur relationships. The data indicate VC cash-flow and control rights significantly facilitating effort and advice that VCs provide to entrepreneurs. VCâentrepreneur conflicts are closely tied to the quality of laws in which the entrepreneur resides: higher quality legal systems mitigate VCâentrepreneur conflicts. The data further indicate that non-contractual governance mechanisms significantly facilitate VC advice and mitigate VCâentrepreneur conflicts. The results provide a unique unifying look into the role of actual VC contracts and legal settings versus non-contractual governance mechanisms, risk, and success potential on VCâentrepreneur relationships in an international context. Copyright Swiss Society for Financial Market Research 2007Venture capital, Monitoring, Advice, G24, G28, G31, G32,