How Institutional Logics Affect the Continuance of the Investor- Entrepreneur Relationship

Abstract

How to ensure continuance of the investor-entrepreneur relationship in post-investment is of central interest for both academics and practitioners. To address this question, prior studies focus either on investors, leveraging instrumental mechanisms such as contracts to design their sequential investments, or on entrepreneurs, highlighting the importance of reducing their incentives to leave. These studies, however, have paid less attention to the dynamics of the investor-entrepreneur dual after the investment was made. Departing from existing studies and drawing upon the institutional logics perspective, this study offers an alternative framework of investor-entrepreneur relationship continuance. It suggests that similarity in institutional logics faciliates interactions between investors and entrepreneurs, and logic similarity can in turn influence their relationship development. Further, it posits that the interaction foundation provided by logic similarity is triggered by situated factors of investor’s motivation and entrepreneur’s expertise. Empirical analyses of 2,052 deals made by 1,032 investors in 382 portfolio firms during the period 2000-2018 in the high-tech industries in China provide general support for these arguments.