Private investors and entrepreneurs : how context shapes their relationship

Kelly, Peter Steven (2000) Private investors and entrepreneurs : how context shapes their relationship. Doctoral thesis, University of London: London Business School.

Abstract

In this thesis, a model is developed and empirically tested with the aim of identifying critical contextual factors that shape the structure of the economic relationship between private investors and entrepreneurs. Transaction cost economics and agency theory are potentially useful theoretical perspectives to understand the difficult issues of how to structure relationships between two parties who may have divergent interests and goals. The predictor variables include measures of specific attributes of the contracting parties and of the transaction itself. The dependent variable, governance effort, is measured in two distinct ways based on: i) the nature of the contractual relationship struck with the entrepreneur ex ante, and ii) the anticipated level of investor interaction with the management team ex post. Survey data was collected from 106 private investors in the UK identified through: i) personal search efforts, ii) Venture Capital Report, and iii) various business introduction services. Multiple regression was used as a basis for testing individual hypotheses. The utility of extending the transaction cost economics and agency theory perspectives into the domain of informal venture capital is also assessed.