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Venture Capitalists' Governance Of Their Portfolio Companies

Author

Listed:
  • ØYSTEIN FREDRIKSEN

    (Department of Management and Economics, Linköping University, Sweden)

  • MAGNUS KLOFSTEN

    (Department of Management and Economics, Linköping University, Sweden)

Abstract

Several sources have emphasized the importance of the entrepreneurial economy, and the role venture capitalists (VCs) plays as financiers. VCs are often actively and personally involved in their portfolio companies, but the cost of governance is high and they therefore have to select when to be active participants. Four different risks are identified in this paper: agency risk, business and market risk, coalition risk, and conformity risk. Weak support is found for the categories of agency and business and market risk. The data speak in favor of VCs getting more involved when the portfolio companies experience some kind of trouble. Their activity level increases when the portfolio companies have an inexperienced CEO, when the companies are in an early stage of their development, are young, have a weak board of directors, and/or a weak performance.

Suggested Citation

  • Øystein Fredriksen & Magnus Klofsten, 2001. "Venture Capitalists' Governance Of Their Portfolio Companies," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 201-219.
    • Handle: RePEc:wsi:jecxxx:v:09:y:2001:i:02:n:s0218495801000110
    DOI: 10.1142/S0218495801000110
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    Cited by:

    1. Anokhin, Sergey & Peck, Simon & Wincent, Joakim, 2016. "Corporate venture capital: The role of governance factors," Journal of Business Research, Elsevier, vol. 69(11), pages 4744-4749.
    2. Luukkonen, Terttu, 2007. "Understanding Strategies of the Venture Capital Investors in Helping Their Portfolio Firms to Become International," Discussion Papers 1099, The Research Institute of the Finnish Economy.

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