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Trustworthiness: A Critical Ingredient for Entrepreneurs Seeking Investors

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  • Andrew L. Maxwell
  • Moren Lévesque

Abstract

We investigate how an entrepreneur's behaviors during an initial interaction with a business angel can build, damage, or violate trust, and how the investor's level of trust (prompted by the entrepreneur's behavior) can affect his/her decision to make an investment offer. Our empirical analysis shows that entrepreneurs who receive offers from business angels exhibit a larger number of trust–building behaviors during the initial interaction and a smaller number of unintentional trust–damaging behaviors than those who do not receive an offer, and display few deliberate trust–violating behaviors. We further observe that the investor's deployment of a control mechanism is a prerequisite for receiving an investment offer for all entrepreneurs who damage or violate trust.

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  • Andrew L. Maxwell & Moren Lévesque, 2014. "Trustworthiness: A Critical Ingredient for Entrepreneurs Seeking Investors," Entrepreneurship Theory and Practice, , vol. 38(5), pages 1057-1080, September.
    • Handle: RePEc:sae:entthe:v:38:y:2014:i:5:p:1057-1080
    DOI: 10.1111/j.1540-6520.2011.00475.x
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    6. Melissa S. Cardon & Cheryl Mitteness & Richard Sudek, 2017. "Motivational Cues and Angel Investing: Interactions among Enthusiasm, Preparedness, and Commitment," Entrepreneurship Theory and Practice, , vol. 41(6), pages 1057-1085, November.
    7. Illoong Kwon & Kitae Sohn, 2021. "Trust or distrust: entrepreneurs vs. self-employed," Small Business Economics, Springer, vol. 56(4), pages 1553-1570, April.
    8. Leonidou, Erasmia & Christofi, Michael & Vrontis, Demetris & Thrassou, Alkis, 2020. "An integrative framework of stakeholder engagement for innovation management and entrepreneurship development," Journal of Business Research, Elsevier, vol. 119(C), pages 245-258.
    9. Bi, Qingqing & Boh, Wai Fong & Christopoulos, Georgios, 2021. "Trust, fast and slow: A comparison study of the trust behaviors of entrepreneurs and non-entrepreneurs," Journal of Business Venturing, Elsevier, vol. 36(6).
    10. Roccapriore, Ashley Y. & Imhof, Zoë & Cardon, Melissa S., 2021. "Badge of honor or tolerable reality? How previous firm failure and experience influences investor perceptions," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    11. Michael Dowling & Colm O’gorman & Petya Puncheva-Michelotti & Dieter Vanwalleghem, 2019. "Trust and SME attitudes towards equity financing across Europe," Post-Print hal-02194484, HAL.
    12. Boulu-Reshef, Béatrice & Kuechle, Graciela & Rohland, Luise Marie, 2024. "Signaling trustworthiness with the choice of a prosocial project: Theory and experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    13. Bracht, Felix & Mahieu, Jeroen & Vanhaverbeke, Steven, 2024. "The signaling value of legal form in entrepreneurial debt financing," Journal of Business Venturing, Elsevier, vol. 39(3).
    14. Lefebvre, Vincent & Certhoux, Gilles & Radu-Lefebvre, Miruna, 2022. "Sustaining trust to cross the Valley of Death: A retrospective study of business angels’ investment and reinvestment decisions," Technovation, Elsevier, vol. 109(C).
    15. José F. Navarro-Picado & Eduardo Torres-Moraga & Manuel Alonso Dos Santos & Brandon Mastromartino & James J. Zhang, 2023. "Strategies of German Bundesliga and English Premier League clubs for the COVID-19 crisis: the case of international broadcasting fans," Review of Managerial Science, Springer, vol. 17(1), pages 209-232, January.
    16. Veroniek Collewaert & Harry J. Sapienza, 2016. "How Does Angel Investor–Entrepreneur Conflict Affect Venture Innovation? It Depends," Entrepreneurship Theory and Practice, , vol. 40(3), pages 573-597, May.
    17. Vincent Lefebvre & Gilles Certhoux & Miruna Radu-Lefebvre, 2022. "Sustaining trust to cross the Valley of Death: A retrospective study of business angels’ investment and reinvestment decisions," Post-Print hal-03545529, HAL.
    18. Adi Hoorvitch Lavi & Eyal Yaniv, 2023. "The Effect of Entrepreneur Attributes on Investment Evaluations in Pitch Competitions," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 32(1), pages 39-74, March.
    19. Subhan Shahid & Ioanna Liouka & Ioanna Deligianni, 2024. "Signaling sustainability: Can it entice business angels' willingness to invest?," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 2832-2848, May.
    20. Fabiana Gatto & Ilaria Re, 2021. "Circular Bioeconomy Business Models to Overcome the Valley of Death. A Systematic Statistical Analysis of Studies and Projects in Emerging Bio-Based Technologies and Trends Linked to the SME Instrumen," Sustainability, MDPI, vol. 13(4), pages 1-40, February.
    21. Sanchez-Ruiz, Paul & Wood, Matthew S. & Long-Ruboyianes, Anna, 2021. "Persuasive or polarizing? The influence of entrepreneurs' use of ingratiation rhetoric on investor funding decisions," Journal of Business Venturing, Elsevier, vol. 36(4).
    22. Pollack, Jeffrey M. & Cardon, Melissa S. & Rutherford, Matthew W. & Ruggs, Enrica N. & Balachandra, Lakshmi & Baron, Robert A., 2023. "Rationality in the entrepreneurship process: Is being rational actually rational? Introduction to the special issue," Journal of Business Venturing, Elsevier, vol. 38(3).
    23. Lien, Wan-Chien & Chen, Jianhong & Sohl, Jeffrey, 2022. "Do I have a big ego? Angel investors' narcissism and investment behaviors," Journal of Business Venturing, Elsevier, vol. 37(5).
    24. Diego Matricano & Mario Sorrentino, 2021. "Does Love Money Affect Vocational Behavior? Empirical Evidence from Italian Entrepreneurs," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(7), pages 110-110, July.
    25. Daniel Blaseg & Lars Hornuf, 2024. "Playing the Business Angel: The Impact of Well-Known Business Angels on Venture Performance," Entrepreneurship Theory and Practice, , vol. 48(1), pages 171-204, January.

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