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Handbook of Research on Venture Capital

Edited by Hans Landström

This Handbook provides an excellent overview of our knowledge on the various facets of managerial venture capital research. The book opens with a thorough survey of venture capital as a research field; conceptual, theoretical and geographic aspects are explored, and its pioneers revisited. The focus then shifts to the specific environs of venture capital.
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Chapter 8: Innovation and Performance Implications of Venture Capital Involvement in the Ventures they Fund

Lowell W. Busenitz


Lowell W. Busenitz Introduction When entrepreneurs choose to take on venture capital funding, the life and dynamics of a venture change substantially. One of the first structural changes to occur is the implementation of a board of directors of which the founding team usually plays a minority role (Rosenstein et al., 1993). There tends to be a fair amount of interaction between venture capitalists and entrepreneurs that may allow venture capitalists to intervene in various capacities to build and protect an entrepreneurial venture. Venture capitalists may help the venture make key links to customers and suppliers, monitor venture performance, act as a sounding board as well as assist with strategic issues (Timmons and Bygrave, 1986; MacMillan et al., 1989; Fried and Hisrich, 1995; Manigart et al., 2006). Research has only begun to explore whether venture capital involvement beyond their financial involvement adds value to the ventures in which they invest as well as the broader economic development. One impetus for the emergence of the venture capitalist–entrepreneur relationship is that it may enable firms to create value by the sharing of knowledge, combining or gaining access to critical resources and decreasing the time required for a new venture to market its products. Venture capitalists spend approximately one-half of their time monitoring an average of nine funded ventures (Gorman and Sahlman, 1989). A venture capitalist’s ongoing involvement with the entrepreneurial team and the venture will generally impact on the venture in a variety of ways. Some research has found support for...

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