How to Create an Effective Venture Capitalist–Entrepreneur Relationship

Abstract

This study investigated the relationship between venture capitalists and entrepreneurs from an entrepreneur’s perspective. Its goal was to examine how perceived justice affects psychological contract breach (PCB) and how PCB evokes reactions in the venture capitalist–entrepreneur relationship. The study was performed according to the grounded theory method. After a literature review, six entrepreneurs were interviewed who had founded a venture that received venture capital investment. Results indicate that distributive justice, formal procedures, informational justice, and interpersonal justice, among others, are important factors that can influence responses to the breach. This article discusses implications for both venture capitalists and entrepreneurs to make better decisions concerning ways to manage an effective relationship. In addition, a conceptual model is presented as a suggestion for future research.

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