Venture Capital Governance and Value Added in Four Countries

Posted: 17 Nov 2009

See all articles by Sophie Manigart

Sophie Manigart

Vlerick Business School; Ghent University

Harry J. Sapienza

University of Minnesota - Twin Cities - Carlson School of Management

Wim Vermeir

affiliation not provided to SSRN

Date Written: 1996

Abstract

Research has identified the means by which venture capitalists (VCs) in the United States add value to their portfolio firms beyond money. The venture capital industry has expanded into other nations, and this study explores the relations of venture capitalists with their portfolio firms in the three largest European venture capital markets –- the United Kingdom, France and the Netherlands. Roles for VCs are categorized as strategic (e.g., providing business advice), interpersonal (e.g., mentoring the CEO), and networking (providing links to other resources). Utilizing agency and organization theory perspectives, this study analyzes governance and decision making issues from the viewpoints of the VCs. Perceived risks and uncertainty are hypothesized to increase the level of interaction between CEO and VC, and to increase the value added by such interaction. Interviews and surveys of venture capitalists and the CEOs of their portfolio firms were conducted in the US in 1987-1988. In 1982, a similar questionnaire was administered to VCs in the three European countries. Both similarities and differences were found among the four countries. In the US and the UK, for example, VCs interact more frequently with their portfolio firms, to monitor and assist them, than do those in France and the Netherlands. However, in all four countries VCs rate the greatest value added as strategic, and the least as networking. The situations in which VCs are likely to provide assistance are also examined. Further research is needed on the interaction between formal governance and more informal oversight.

Keywords: Monitoring, Networking, Decision making, Business counseling, Business assistance, Venture capitalists, Venture capital firms, Firm governance, Intermediaries, Mentoring

Suggested Citation

Manigart, Sophie and Sapienza, Harry J. and Vermeir, Wim, Venture Capital Governance and Value Added in Four Countries (1996). Journal of Business Venturing, Vol. 11, Issue 6, p. 439-469 1996. Available at SSRN: https://ssrn.com/abstract=1506763

Sophie Manigart

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

Harry J. Sapienza

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Wim Vermeir

affiliation not provided to SSRN

No Address Available

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