Nature and Evolution of Trust in Venture Capitalist-Entrepreneur Relationship

Abstract

Investigating trust in inter-organizational relationships is challenging because of its multidimensional and temporal nature. In addition, the nature of trust is also influenced by the stage of the life cycle that the venture is in when the relationship is initiated. Majority research overlooks these complexities and thus fails to explore the progression/deterioration of trust with the evolution of the relationship. Our paper addresses these gaps by focusing on the nature and evolution of trust in Venture Capitalist-Entrepreneur relationships initiated at different stages of a venture’s life cycle. The context of our study is an emerging market where entrepreneurship has become the major contributor to the economy. In line with this objective, we employ multiple case studies comprising ten Venture Capitalist-Entrepreneur dyads in India. Our results suggest that relationships developed at the early stage of the venture life cycle exhibit calculus-based trust, which develops into knowledge-based trust, and in few instances into the identity-based trust. Whereas, relationships developed at the late-stage of the venture life cycle stagnate at the calculus-based trust. The late-stage relationships were also marred with a healthy dose of distrust.