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Venture Capital and Risk in High-Technology Enterprises

Author

Listed:
  • Gavin C. Reid

    (Department of Economics, University of St. Andrews, U.K.)

  • Julia A. Smith

    (Cardiff Business School, Cardiff University, U.K.)

Abstract

We find UK investors and entrepreneurs are significantly concordant in rankings of investments and key factors for risk but significantly discordant on risk classes. Investors emphasise agency risk (e.g., motivation, empowerment, alignment), and entrepreneurs emphasise business risk (e.g., market opportunities).

Suggested Citation

  • Gavin C. Reid & Julia A. Smith, 2003. "Venture Capital and Risk in High-Technology Enterprises," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(3), pages 227-244, December.
    • Handle: RePEc:ijb:journl:v:2:y:2003:i:3:p:227-244
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    References listed on IDEAS

    as
    1. Chan, Yuk-Shee, 1983. "On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information," Journal of Finance, American Finance Association, vol. 38(5), pages 1543-1568, December.
    2. Brouwer, Erik & Kleinknecht, Alfred, 1999. "Innovative output, and a firm's propensity to patent.: An exploration of CIS micro data," Research Policy, Elsevier, vol. 28(6), pages 615-624, August.
    3. Chan, Yuk-Shee & Siegel, Daniel R & Thakor, Anjan V, 1990. "Learning, Corporate Control and Performance Requirements in Venture Capital Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 365-381, May.
    4. Falconer Mitchell & Gavin C. Reid & Nicholas G. Terry, 1997. "Venture Capital Supply and Accounting Information System Development," Entrepreneurship Theory and Practice, , vol. 21(4), pages 45-62, July.
    5. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
    6. Gavin C Reid & Lowell R Jacobsen., "undated". "The Small Entrepreneurial Firm," Hume Papers 8, David Hume Institute.
    7. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
    8. Beetsma, Roel M W J & Schotman, Peter C, 2001. "Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show Lingo," Economic Journal, Royal Economic Society, vol. 111(474), pages 821-848, October.
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    10. Steven N. Kaplan & Per Stromberg, 2001. "Venture Capitalists As Principals: Contracting, Screening, and Monitoring," NBER Working Papers 8202, National Bureau of Economic Research, Inc.
    11. Bhattacharyya, Sugato & Leach, J Chris, 1999. "Risk Spillovers and Required Returns in Capital Budgeting," The Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 461-479.
    12. Lefley, Frank, 1997. "Approaches to risk and uncertainty in the appraisal of new technology capital projects," International Journal of Production Economics, Elsevier, vol. 53(1), pages 21-33, November.
    13. repec:wuk:andedp:9616 is not listed on IDEAS
    14. Gavin C. Reid, 1999. "The application of principal-agent methods to investor-investee relations in the UK venture capital industry," Venture Capital, Taylor & Francis Journals, vol. 1(4), pages 285-302, October.
    15. Falconer Mitchell & Gavin Reid & Nicholas Terry, 1999. "Accounting information system development and the supply of venture capital," Chapters, in: Mike Wright & Ken Robbie (ed.), Management Buy-outs and Venture Capital, chapter 12, Edward Elgar Publishing.
    16. Bricker, Robert & Chandar, Nandini, 2000. "Where Berle and Means went wrong: a reassessment of capital market agency and financial reporting," Accounting, Organizations and Society, Elsevier, vol. 25(6), pages 529-554, August.
    17. Harry J. Sapienza & M. Audrey Korsgaard & Philip K. Goulet & Jeffrey P. Hoogendam, 2000. "Effects of agency risks and procedural justice on board processes in venture capital-backed firms," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 12(4), pages 331-351, October.
    18. Murray, Gordon C. & Marriott, Richard, 1998. "Why has the investment performance of technology-specialist, European venture capital funds been so poor?," Research Policy, Elsevier, vol. 27(9), pages 947-976, December.
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    20. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
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    Cited by:

    1. Smith, Julia A. & Morris, Jonathan & Ezzamel, Mahmoud, 2005. "Organisational change, outsourcing and the impact on management accounting," The British Accounting Review, Elsevier, vol. 37(4), pages 415-441.
    2. Jong-Shin Wei & Chwen-Chi Liu, 2003. "Structure, Conduct, and Performance of Principal-Agent Models: An Overview," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(3), pages 177-178, December.

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    More about this item

    Keywords

    principal-agent; high-tech; risk;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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