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Preinvestment Negotiation Characteristics and Dismissal in Venture Capital-Backed Firms

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Abstract:

In this study, we investigated idiosyncratic preinvestment process characteristics that influence the dismissal of management team members of venture capital-backed firms in the postinvestment phase by analyzing sixty-three portfolio firms. We considered two salient perspectives within the literature on governance of interfirm relationships: contractual and relational governance, which are related to positional and collaborative negotiation styles. Our findings indicate that positional bargaining in the preinvestment phase may be a reliable indicator that there is a greater risk that new venture team members will be dismissed when things get tough in the post-investment period.

Keywords: dismissal; event history; governance; negotiation; venture capital

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1571-9979.2008.00207.x

Affiliations: 1: Norwegian University of Science and Technology (NTNU) in Trondheim, Norway 2: Skagerak Venture Capital in Kristiansand, Norway

Publication date: January 1, 2009

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