Dmitry Khanin is visiting assistant professor in the Department of Management at the University of La Verne.
Conflicts and Regrets in the Venture Capitalist–Entrepreneur Relationship
Version of Record online: 3 APR 2014
© 2014 International Council for Small Business
Journal of Small Business Management
Volume 53, Issue 4, pages 949–969, October 2015
How to Cite
Khanin, D. and Turel, O. (2015), Conflicts and Regrets in the Venture Capitalist–Entrepreneur Relationship. Journal of Small Business Management, 53: 949–969. doi: 10.1111/jsbm.12114
- Issue online: 9 SEP 2015
- Version of Record online: 3 APR 2014
The goal of this paper is to examine whether conflicts with venture capitalists (VCs) could prompt chief executive officers (CEOs) to experience regret of action (regarding their poor partner choice) or regret of inaction (regarding their own inability to avert conflict). We argue that it is important to examine such feelings of regret that could motivate CEOs to change their financial intermediation and collaboration strategies in the future. We propose that VCs and CEOs may experience two types of conflict: (1) pacing conflicts regarding the direction and speed of venture advancement driven by perceived inequities in economic and social exchange; and (2) prerogative conflicts about the allocation of control rights and relationship issues driven by the perceived inequities in power relations. We hypothesize that pacing conflicts will be related to increasingly intense prerogative conflicts, whereas the latter will be associated with both types of CEO regret. The proposed model is tested with structural equation modeling techniques applied to the data collected from104 CEOs of VC-backed ventures. All the hypotheses are supported. Our main finding is that CEOs appear to be ambivalent about their conflict with VCs, regretting both their prior choices as an error of judgment (regret of action) and their own lack of initiative (regret of inaction).