Chapter 5: The role of trust in the informal investor's investment decision: an exploratory analysis
Page 115 5. The role of trust in the informal investor’s investment decision: an exploratory analysis Mark Dibben, Richard Harrison and Colin Mason Introduction Research into the role of informal venture capital in financing the development of entrepreneurial ventures has grown significantly in North America and, more recently, Europe (Freear et al., 1996; Harrison and Mason, 1996a; Mason and Harrison, 1995a, 1995b, 1996a). This research can be characterised in three ways. First, it has been and remains primarily empirical in nature, reflecting the continuing need to ‘put boundaries on our ignorance’ (Wetzel, 1986, p. 132) of what is still largely an invisible and secretive marketplace (Freear et al., 1996; Harrison and Mason, 1996a; 1996b). Second, it has had a very strong public policy and prescriptive emphasis, focused on understanding how the market operates and identifying mechanisms by which it could be made to work more efficiently and effectively (Wetzel, 1986; Harrison and Mason, 1996a, 1996b; Suomi and Lumme, 1994; Mason, 1996). Third, and partly as a consequence of these two trends, research on informal venture capital has not been characterised to date by a high level of theoretical sophistication, although recent research has considered the applicability of the pecking order hypothesis (Harrison and Mason, 1991), decision theory (Landstrom, 1995; Riding et al., 1995), the economic analysis of altruism (Sullivan and Miller, 1990), and agency theory (Landstrom, 1993; Fiet, 1995a; 1995b). In this chapter we extend this third strand of enquiry to explore the relevance of the concept of trust to...
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