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The Role Angel Investors In The Assembly Of Non-Financial Resources Of New Ventures: Conceptual Framework And Empirical Evidence

Author

Listed:
  • ALEXANDER ARDICHVILI

    (Department of Human Resource Education, University of Illinois, USA)

  • RICHARD N. CARDOZO

    (University of Minnesota, USA)

  • KATHLEEN TUNE

    (USBancorp Piper Jaffray, USA)

  • JUDY REINACH

    (Key Biscayne, Florida, USA)

Abstract

This study investigated the types of non-financial resources that private investors contribute to fledgling businesses, and reasons for providing these resources. The study is grounded in the resource-based theory of the firm (Penrose, 1959; Rumelt, 1984), and agency theory (Jensen and Meckling, 1976). In-depth interviews were conducted with 27 serial angel investors. Results documented in detail the types of non-financial resources that angels provide to new firms, including business ideas, top managers and network connections - as well as funds. We demonstrate that angles manage risk through a combination of techniques, which has as much to do with managing returns for the business as with managing agency risk. We also describe in detail distinct patterns of investment behavior among private investors, ranging from the dominant pattern of "partnership" with entrepreneurs to the rarer pattern of "passive" investing. Differences in patterns of investment behaviour appear to have significant implications for entrepreneurs seeking startup support from private investors. This study provides a starting point for development of a theory of resource provision and assembly for new firms.

Suggested Citation

  • Alexander Ardichvili & Richard N. Cardozo & Kathleen Tune & Judy Reinach, 2002. "The Role Angel Investors In The Assembly Of Non-Financial Resources Of New Ventures: Conceptual Framework And Empirical Evidence," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 39-65.
    • Handle: RePEc:wsi:jecxxx:v:10:y:2002:i:01:n:s021849580200013x
    DOI: 10.1142/S021849580200013X
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    Cited by:

    1. David Johnson & Adam J. Bock, 2017. "Coping with uncertainty: entrepreneurial sensemaking in regenerative medicine venturing," The Journal of Technology Transfer, Springer, vol. 42(1), pages 33-58, February.
    2. Cox, Kevin C. & Lortie, Jason & Stewart, Steven A., 2017. "When to pray to the angels for funding: The seasonality of angel investing in new ventures," Journal of Business Venturing Insights, Elsevier, vol. 7(C), pages 68-76.
    3. Bonini, Stefano & Capizzi, Vincenzo & Zocchi, Paola, 2019. "The performance of angel-backed companies," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 328-345.
    4. Appah Ebimobowei & Okoli Margaret Nnenna, 2013. "Angel Investments: A Financing Option for Economic Transformation in Nigeria," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 1(9), pages 341-348.

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