The impact of contracts on trust in entrepreneur–venture capitalist relationships

Strätling, R.; Wijbenga, F.H.; Dietz, G.

doi:10.1177/0266242610388822

The impact of contracts on trust in entrepreneur–venture capitalist relationships

Strätling, R.; Wijbenga, F.H.; Dietz, G.

Authors

Dr Rebecca Stratling rebecca.stratling@durham.ac.uk
Associate Professor

F.H. Wijbenga

G. Dietz

Abstract

Venture capitalists (VCs) increasingly rely on elaborate formal contracts and incentivization through share ownership to manage their relationships with the entrepreneurial firms in which they invest. This study analyses the impact of a high degree of such ‘neoclassical contracting’ on entrepreneurs’ trust in their VC backers. The results from a sample of 86 Dutch entrepreneurial firms indicate not only that a high degree of neoclassical contracting tends to erode entrepreneurs’ trust in their VCs, but also that the use of more informal, relational contracting fails to moderate the negative association between a strong focus on neoclassical contracts and trust. However, entrepreneurs do welcome some level of monitoring, which highlights the enduring tension between trust and control, and the need for VCs to strike a productive balance.

Citation

Strätling, R., Wijbenga, F., & Dietz, G. (2012). The impact of contracts on trust in entrepreneur–venture capitalist relationships. International Small Business Journal, 30(8), 811-831. https://doi.org/10.1177/0266242610388822

Journal Article Type	Article
Online Publication Date	Feb 18, 2011
Publication Date	Dec 18, 2012
Deposit Date	Jan 10, 2012
Publicly Available Date	Sep 12, 2017
Journal	International Small Business Journal
Print ISSN	0266-2426
Electronic ISSN	1741-2870
Publisher	SAGE Publications
Peer Reviewed	Peer Reviewed
Volume	30
Issue	8
Pages	811-831
DOI	https://doi.org/10.1177/0266242610388822
Public URL	https://durham-repository.worktribe.com/output/1522977

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Copyright Statement
Strätling, R., Wijbenga, F.H. and Dietz, G. (2012) 'The impact of contracts on trust in entrepreneur–venture capitalist relationships.', International small business journal., 30 (8). pp. 811-831. © 2011 The Author(s). Reprinted by permission of SAGE Publications.