Entrepreneurship, Competitiveness and Local Development
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Entrepreneurship, Competitiveness and Local Development

Frontiers in European Entrepreneurship Research

Edited by Luca Iandoli, Hans Landström and Mario Raffa

This book draws together leading academics to provide a state-of-the-art overview of the key challenges to entrepreneurship in Europe.
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Chapter 11: The Impact of the Venture Capitalists’ Service and Monitoring Activities on Control Systems and Performance of Entrepreneurial Firms

Frits H. Wijbenga, Theo J.B.M. Postma and Rebecca Stratling

Extract

11. The impact of the venture capitalists’ service and monitoring activities on control systems and performance of entrepreneurial firms Frits H. Wijbenga, Theo J.B.M. Postma and Rebecca Stratling INTRODUCTION By being represented on the entrepreneurial firm’s board of directors, the venture capitalist (VC) can play an active role in the strategy development and evaluation process of the entrepreneurial firm by offering value-adding activities (Gorman and Sahlman, 1989; MacMillan et al., 1989; Rosenstein et al., 1993; Sapienza et al., 1996; Fried et al., 1998; Deakins et al., 2000; Gabrielsson and Huse, 2002). Seminal work on the VC’s added value (for example, MacMillan et al., 1989; Sapienza and Timmons, 1989; Rosenstein et al., 1993; Ehrlich et al., 1994) has reached a general consensus as to which value-adding activities are provided to entrepreneurial firms (Sapienza, 1992; Sapienza et al., 1996). However, there is little agreement in the literature as to whether the VC’s board activities actually increase entrepreneurial firm performance (ibid.; Flynn, 2001). This chapter attempts to resolve the VC ‘added value’ proposition by opening up the ‘black box’ between the VC’s value-adding activities on the one hand, and the entrepreneurial firm’s performance on the other. Previous research mainly focuses on partial relationships between either the impact of the VC’s value-adding activities on the entrepreneurial firm’s performance, or the impact of the VC’s value-adding activities on the development of (control) systems present in the entrepreneurial firm. This study adopts a multi-theoretical approach and integrates both streams of research in order to get...

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