Abstract
Previous studies have established that venture capitalists (VCs) adjust their investment decisions according to the economic outcome of their cooperation with entrepreneurs. However, investment decisions made by VCs are embedded in social interaction and influenced by information from third parties. Therefore, research studies on interpersonal trust in the disciplines of economics, psychology and neuroscience were integrated in this paper to explore how the trust cognition of VCs in entrepreneurs’ behavior consistency affects their investment decision-making. First, behavioral consistency is the criterion used by VCs to assess the credibility of entrepreneurs. Second, a trust game was designed for VCs and entrepreneurs, during which EEG (electroencephalogram) of the VCs was recorded. Finally, a learning model was developed on each participant’s behavior and showed the process of investment decision-making. The results indicated that investment decisions of VCs are significantly affected by trust cognition and rewards of cooperation, VCsʼ investment decisions are guided by their trust cognition in the behavioral consistency of entrepreneurs and investment experiences have a significant impact on investment decisions when VCs are cooperating with entrepreneurs with a moderate level of behavioral consistency. One explanation for these findings may be a result of the fact that the neutral information is ambiguous and uncertain; thus, VCs preferred to rely on the outcome of cooperation to adjust their investment decisions.
Funding statement: There isn’t funders in the study.
Conflicts of interest: Yang Hongtao and Li Haiyan have no relevant financial interests to disclose.
References
Amit, R., L. Glosten, and E. Muller. 1990. “Entrepreneurial Ability, Venture Investments, and Risk Sharing.” Informs 36 (10):1232–1245.10.1287/mnsc.36.10.1233Suche in Google Scholar
Averbeck, B. B., and B. Duchaine. 2009. “Integration of Social and Utilitarian Factors in Decision Making.” Emotion 9 (5):599–608.10.1037/a0016509Suche in Google Scholar
Bäckman, L., U. Lindenberger, S. C. Li, and L. Nyberg. 2011. “Linking Cognitive Aging to Alterations in Dopamine Neurotransmitter Functioning: Recent Data and Future Avenues.” Neuroscience and Biobehavioral Reviews 34 (5):670–677.10.1016/j.neubiorev.2009.12.008Suche in Google Scholar
Baribeau, J., M. Ethier, and C. Braun. 1987. Neuropsychological Assessment of Selective Attention Inmales at Risk for Alcoholism. Amsterdam: Elsevier.Suche in Google Scholar
Baron, R. A. 2006. “Opportunity Recognition as Pattern Recognition: How Entrepreneurs ‘Connect the Dots’ to Identify New Business Opportunities.” Academy of Management Perspectives 20 (1):104–119.10.5465/AMP.2006.19873412Suche in Google Scholar
Baron, R. A., and M. D. Ensley. 2006. “Opportunity Recognition as the Detection of Meaningful Patterns: Evidence from Comparison of Novice and Experienced Entrepreneurs.” Management Science 52 (9):1331–1344.10.1287/mnsc.1060.0538Suche in Google Scholar
Baron, R. A., and G. D. Markman. 2003. “Beyond Social Capital: The Role of Entrepreneurs’ Social Competence in Their Financial Success.” Journal of Business Venturing 18:41–60.10.1016/S0883-9026(00)00069-0Suche in Google Scholar
Barry, D., and M. Elmes. 1997. “Strategy Retold: Toward a Narrative View of Strategic Discourse.” Academy of Management Review 22 (2):429–452.10.4324/9781351147965-3Suche in Google Scholar
Bellebaum, C., and I. Daum. 2008. “Learning-Related Changes in Reward Expectancy are Reflected in the Feedback-Related Negativity.” European Journal of Neuroscience 27 (7):1823–1835.10.1111/j.1460-9568.2008.06138.xSuche in Google Scholar
Bergemann, D., and U. Hege. 1998. “Venture Capital Financing, Moral Hazard, and Learning.” Journal of Banking & Finance 22 (6–8):703–735.10.1016/S0378-4266(98)00017-XSuche in Google Scholar
Berghe, L. A. A., and A. Levrau. 2002. “The Role of the Venture Capitalist as Monitor of the Company: A Corporate Governance Perspective.” Corporate Governance 10 (3):124–135.10.1111/1467-8683.00278Suche in Google Scholar
Binzel, C., and D. Fehr. 2013. “Social Distance and Trust: Experimental Evidence from a Slum in Cairo.” Journal of Development Economics 103:99–106.10.1016/j.jdeveco.2013.01.009Suche in Google Scholar
Boksem, M. A., and A. Smidts. 2015. “Brain Responses to Movie Trailers Predict Individual Preferences for Movies and Their Population-Wide Commercial Success.” Journal of Marketing Research 52 (4):482–492.10.1509/jmr.13.0572Suche in Google Scholar
Boocock, J. G., and M. Woods. 1997. “The Evaluation Criteria Used by Venture Capitalists: Evidence from a UK Fund.” International Small Business Journal 16 (1):36–57.10.1177/0266242697161003Suche in Google Scholar
Bottazzi, L., and M. T. DaRin. 2007. “The Importance of Trust for Investment: Evidence from Venture Capital.” Neuroreport 2009-43 (521):1–44.10.3386/w16923Suche in Google Scholar
Bottazzi, L., M. DaRin, and T. F. Hellmann. 2011. The Importance of Trust for Investment: Evidence from Venture Capital. NBER working paper series 16923. http://www.nber.org/papers/w16923.10.3386/w16923Suche in Google Scholar
Boyatzis, R. E., A. M. Passarelli, K. Koenig, et al. 2012. “Examination of the Neural Substrates Activated in Memories of Experiences with Resonant and Dissonant Leaders.” Leadership Quarterly 23 (2):259–272.10.1016/j.leaqua.2011.08.003Suche in Google Scholar
Brehm, J., and W. M. Rahn. 1997. “Individual-Level Evidence for the Causes and Consequences of Social Capital.” American Journal of Political Science 41 (3):999–1023.10.2307/2111684Suche in Google Scholar
Campos-Castillo, C., and K. Ewoodzie. 2014. “Relational Trustworthiness: How Status Affects Intra-Organizational Inequality in Job Autonomy.” Social Science Research 44 (44):60–74.10.1016/j.ssresearch.2013.11.001Suche in Google Scholar
Chang, L. J., B. B. Doll, W. M. Van’t, et al. 2010. “Seeing Is Believing: Trustworthiness as a Dynamic Belief.” Cognition Psychology 61 (2):87–105.10.1016/j.cogpsych.2010.03.001Suche in Google Scholar
Chen, C., and Y. Ye. 2010. “A Case Study of the Asymmetry of Trust among Venture Capitalists and Entrepreneurs.” Chinese Industrial Economy 01:147–157.Suche in Google Scholar
Chen, J., J. Zhong, Y. X. Zhang, et al. 2012. “Electrophysiological Correlates of Processing Facial Attractiveness and Its Influence on Cooperative Behavior.” Neuroscience Letters 517 (2):65–70.10.1016/j.neulet.2012.02.082Suche in Google Scholar
Cornelissen, J. P., and J. S. Clarke. 2010. “Imagining and Rationalizing Opportunities: Inductive Reasoning and the Creation and Justification of New Ventures.” Academy of Management Review 35 (4):539–557.10.5465/AMR.2010.53502700Suche in Google Scholar
Das, T. K., and B. S. Teng. 1998. “Between Trust and Control: Developing Confidence in Partner Cooperation and Alliances.” Academy of Management Review 23 (3):491–512.10.2307/259291Suche in Google Scholar
Delgado, M. R., R. H. Frank, and E. A. Phelps. 2005. “Perceptions of Moral Character Modulate the Neural Systems of Reward during the Trust Game.” Nature Neuroscience 8 (11):1611–1618.10.1038/nn1575Suche in Google Scholar
Dirks, K. T., and D. L. Ferrin. 2001. “The Role of Trust in Organizational Settings.” Organization Science 12 (4):450–467.10.1287/orsc.12.4.450.10640Suche in Google Scholar
Duffner, S., M. Schmid, and H. Zimmermann. 2009. “Trust and Success in Venture Capital Financing – An Empirical Analysis with German Survey Data.” Kyklos 62 (1):15–43.10.1111/j.1467-6435.2009.00426.xSuche in Google Scholar
Eimer, M., and A. Holmes. 2002. “An ERP Study on the Time Course of Emotional Face Processing.” Neuroreport 13 (4):427–431.10.1097/00001756-200203250-00013Suche in Google Scholar
Elitzur, R., and A. Gavious. 2003. “A Multi-Period Game Theoretic Model of Venture Capital Investment.” European Journal of Operational Research 144 (2):440–453.10.1016/S0377-2217(02)00144-3Suche in Google Scholar
Fama, E. F., and M. C. Jensen. 1983. “Separation of Ownership and Control.” Journal of Law and Economics 26 (6):301–325.10.1086/467037Suche in Google Scholar
Fouragnan, E., G. Chierchia, S. Greiner, et al. 2013. “Reputational Priors Magnify Striatal Responses to Violations of Trust.” The Journal of Neuroscience 33 (8):3602–3611.10.1523/JNEUROSCI.3086-12.2013Suche in Google Scholar
Gaertig, C., A. Moser, S. Alguacil, et al. 2012. “Social Information and Economic Decision-Making in the Ultimatum Game.̋.” Frontiers in Neuroscience 6 (6):103.10.3389/fnins.2012.00103Suche in Google Scholar
Gajewski, P. D., P. Stoerig, and M. Falkenstein. 2008. “ERP-Correlates of Response Selection in a Conflict Paradigm.” Brain Research 1189 (1):127–134.10.1016/j.brainres.2007.10.076Suche in Google Scholar
Gazda, V., M. Gróf, J. Horváth, et al. 2012. “Agent Based Model of a Simple Economy.” Journal of Economic Interaction Coordination 7 (2):209–221.10.1007/s11403-012-0097-2Suche in Google Scholar
Gifford, S. 1997. “Limited Attention and the Role of the Venture Capitalist.” Journal of Business Venturing 12 (6):459–482.10.1016/S0883-9026(96)00130-9Suche in Google Scholar
Giot, P., and A. Schwienbacher. 2007. “IPOs Trade Sales and Liquidations: Modelling Venture Capital Exits Using Survival Analysis.” Journal of Banking & Finance 31 (3):679–702.10.1016/j.jbankfin.2006.06.010Suche in Google Scholar
Gompers, P. A., and J. Lerner. 1999. The Venture Capital Cycle. Cambridge: MIT Press.Suche in Google Scholar
Hagen, J. M., and S. Choe. 1998. “Trust in Japanese Interfirm Relations: Institutional Sanctions Matter.” Academy of Management Review 23 (3):589–600.10.5465/amr.1998.926628Suche in Google Scholar
Hajcak, G., J. S. Moser, C. B. Holroyd, et al. 2006. “The Feedback-Related Negativity Reflects the Binary Evaluation of Good versus Bad Outcomes.” Biological Psychology 71 (2):148–154.10.1016/j.biopsycho.2005.04.001Suche in Google Scholar
Hannah, S. T., P. A. Balthazard, D. A. Waldman, et al. 2013. “The Psychological and Neurological Bases of Leader Self-Complexity and Effects on Adaptive Decision-Making.” Journal of Applied Psychology 98 (3):393–411.10.1037/a0032257Suche in Google Scholar
Higashide, H., and S. Birley. 2002. “The Consequences of Conflict between the Venture Capitalist and the Entrepreneurial Team in the United Kingdom from the Perspective of the Venture Capitalist.” Journal of Business Venturing 17 (1):59–81.10.1016/S0883-9026(00)00057-4Suche in Google Scholar
Hochberg, Y., A. Ljungqvist, and Y. Lu. 2007. “Whom You Know Matters: Venture Capital Networks and Investment Performance.” Journal of Finance 62:251–302.10.1111/j.1540-6261.2007.01207.xSuche in Google Scholar
Holan, P. M. D. 2013. “It´S All in Your Head. Why We Need Neuroentrepreneurship.” Journal of Management Inquiry 23 (1):93–97.10.1177/1056492613485913Suche in Google Scholar
Huff, L., and L. Kelley. 2003. “Levels of Organizational Trust in Individualistic versus Collectivist Societies: A Seven-Nation Study.” Organization Science 14:81–90.10.1287/orsc.14.1.81.12807Suche in Google Scholar
Jones, R. M., L. H. Somerville, J. Li, et al. 2011. “Behavioral and Neural Properties of Social Reinforcement Learning.” Journal of Neuroscience 31 (37):13039–13045.10.1523/JNEUROSCI.2972-11.2011Suche in Google Scholar
Jones, W. J., T. L. Childers, and Y. Jiang. 2012. “The Shopping Brain: Math Anxiety Modulates Brain Responses to Buying Decisions.” Biological Psychology 89 (10):201–213.10.1016/j.biopsycho.2011.10.011Suche in Google Scholar
Kelly, P., and M. Hay. 2003. “Business Angel Contracts: The Influence of Context.” Venture Capital 5 (4):287–312.10.1080/1369106032000141940Suche in Google Scholar
Kwon, S. W., and P. Arenius. 2010. “Nations of Entrepreneurs: A Social Capital Perspective.” Journal of Business Venturing 25 (3):315–330.10.1016/j.jbusvent.2008.10.008Suche in Google Scholar
Leng, Y., and X. L. Zhou. 2010. “Modulation of the Brain Activity in Outcome Evaluation by Interpersonal relationship-An ERP Study.” Neuropsychologia 48 (2):448–455.10.1016/j.neuropsychologia.2009.10.002Suche in Google Scholar
Lewicki, R. J., and B. B. Bunker. 1995. “Trust in Relationships: A Model of Development and Decline.” In Conflict, Cooperation and Justice, edited by B. B. Bunker and J. Z. Rubin, 133–173. San Francisco: Jossey-Bass Publishers.Suche in Google Scholar
Li, J., M. R. Delgado, and E. A. Phelps. 2011. “How Instructed Knowledge Modulates the Neural Systems of Reward Learning.” Proceedings of National Academy Science 108 (1):55–60.10.1073/pnas.1014938108Suche in Google Scholar
Lindquist, M. J., J. Sol, and M. V. Praag. 2012. “Why Do Entrepreneurial Parents Have Entrepreneurial Children?” Iza Discussion Paper 33 (2):269–296.10.1086/678493Suche in Google Scholar
Long, Y., X. Jiang, and X. Zhou. 2012. “To Believe or Not to Believe: Trust Choice Modulates Brain Responses in Outcome Evaluation.” Neuroscience 200 (1):50–58.10.1016/j.neuroscience.2011.10.035Suche in Google Scholar
Ma, Q. G., X. Y. Wang, L. C. Shu, et al. 2008. “P300 and Categorization in Brand Extension.” Neuroscience Letters 431 (1):57–61.10.1016/j.neulet.2007.11.022Suche in Google Scholar
Maxwell, A. L., S. A. Jeffrey, and M. Lévesque. 2011. “Business Angel Early Stage Decision Making.” Journal of Business Venturing26 (2):212–225.10.1016/j.jbusvent.2009.09.002Suche in Google Scholar
Mayer, R. C., J. H. Davis, and F. D. Schoorman. 1995. “An Integrative Model of Organizational Trust.” The Academy of Management Review 20 (3):709–734.10.2307/258792Suche in Google Scholar
McClure, S. M., J. Li, D. Tomlin, et al. 2004. “Neural Correlates of Behavioral Perference for Culturally Familiar Drinks.” Neuron 44 (2):379–387.10.1016/j.neuron.2004.09.019Suche in Google Scholar
McEvily, B., V. Perrone, and A. Zaheer. 2003. “Trust as an Organizing Principle.” Organization Science 14 (1):91–103.10.1287/orsc.14.1.91.12814Suche in Google Scholar
Mitchell, R. K., L. Busenitz, B. Bird, et al. 2007. “The Central Question in Entrepreneurial Cognition Research.” Entrepreneurship Theory and Practice 31 (1):1–27.10.1111/j.1540-6520.2007.00161.xSuche in Google Scholar
Mitteness, C., R. Sudek, and M. S. Cardon. 2012. “Angel Investor Characteristics that Determine whether Perceived Passion Leads to Higher Evaluations of Funding Potential.” Journal of Business Venturing 27 (5):592–606.10.1016/j.jbusvent.2011.11.003Suche in Google Scholar
Nicolaou, N., S. Shane, L. Cherkas, et al. 2009. “Opportunity Recognition and the Tendency to be an Entrepreneur: A Bivariate Genetics Perspective.” Organizational Behavior and Human Decision Processes 110 (2):108–117.10.1016/j.obhdp.2009.08.005Suche in Google Scholar
Nooteboom, B. 1996. “Trust, Opportunism and Governance: A Process and Control Model.” Organization Studies 17 (6):985–1010.10.1177/017084069601700605Suche in Google Scholar
Petersen, M. A., and R. G. Rajan. 1995. “The Effect of Credit Market Competition on Lending Relationships.” Quarterly Journal of Economics 110 (2):407–443.10.2307/2118445Suche in Google Scholar
Polich, J., and A. Kokb. 1995. “Cognitive and Biological Determinants of P300: Anintegrative Review.” Biological Psychology 41 (2):103–146.10.1016/0301-0511(95)05130-9Suche in Google Scholar
Poon, J. M. 2013. “Effects of Benevolence, Integrity, and Ability on Trust-In-Supervisor.” Employee Relations 35 (4):396–407.10.1108/ER-03-2012-0025Suche in Google Scholar
Quale, L., N. Nicolaou, S. Shane, et al. 2012. “A Study of Gene-Environment Interactions in Entrepreneurship.” Entrepreneurship Research Journal 2 (2):1–18.10.1515/2157-5665.1053Suche in Google Scholar
Radell, M. L., R. Sanchez, N. Weinflash, et al. 2016. “The Personality Trait of Behavioral Inhibition Modulates Perceptions of Moral Character and Performance during the Trust Game: Behavioral Results and Computational Modeling.” Peerj 4:e1631.10.7717/peerj.1631Suche in Google Scholar
Rousseau, D. M., S. B. Sitkin, S. R. Burt, et al. 1998. “Not so Different after All: A Cross-Discipline View of Trust.” The Academy of Management Review 23 (3):393–404.10.5465/AMR.1998.926617Suche in Google Scholar
Sapienza, H. J., and A. K. Gupta. 1994. “Impact of Agency Risks and Task Uncertainty on Venture capitalist-CEOinteraction.” Academy of Management Journal 37 (6):1618–1632.10.2307/256802Suche in Google Scholar
Shapiro, S. P. 1987. “The Social Control of Impersonal Trust.” American Journal of Sociology 93 (3):623–658.10.1086/228791Suche in Google Scholar
Simons, T., H. Leroy, V. Collewaert, et al. 2016. “How Leader Alignment of Words and Deeds Affects Followers: A Meta-Analysis of Behavioral Integrity Research.” Journal of Business Ethics 132 (4):831–844.10.1007/s10551-014-2332-3Suche in Google Scholar
Singh, S., P. Norvig, and D. Cohn. 1997. Agents and Reinforcement Learning. San Mateo, CA: Miller Freeman Publish Inc.Suche in Google Scholar
Sorenson, O., and T. Stuart. 2001. “Syndication Networks and the Spatial Distribution of Venture Capital Investments.” American Journal of Sociology 106 (6):1546–1588.10.1086/321301Suche in Google Scholar
Stanley, D. A., P. Sokol-Hessner, D. S. Fareri, et al. 2012. “Race and Reputation: Perceived Racial Group Trustworthiness Influences the Neural Correlates of Trust Decisions.” Philosophical Transactions of the Royal Society of London 367 (1589):744–753.10.1098/rstb.2011.0300Suche in Google Scholar
Storey, D. J., and B. S. Tether. 1998. “New Technology-Based Firms in the European Union: An Introduction.” Research Policy 26 (9):933–946.10.1016/S0048-7333(97)00052-8Suche in Google Scholar
Sutton, R. S., and A. G. Barto. 1998. Reinforcement Learning: An Introduction. Cambridge: MIT Press.10.1109/TNN.1998.712192Suche in Google Scholar
Telpaza, A., R. Webb, and D. Levy. 2015. “Using EEG to Predict Consumers’ Future Choices.” Journal of Marketing Research 52 (4):511–529.10.1509/jmr.13.0564Suche in Google Scholar
Van Osnabrugge, M., and R. J. Robinson. 2001. “The Influence of a Venture Capitalist’s Source of Funds.” Venture Capital 3 (1):25–39.10.1080/13691060117288Suche in Google Scholar
Veld, C., and Y. V. Veld-Merkoulova. 2008. “The Risk Perceptions of Individual Investors.” Journal of Economic Psychology 29 (2):226–252.10.1016/j.joep.2007.07.001Suche in Google Scholar
Waldman, D. A., P. A. Balthazard, and S. J. Peterson. 2011. “Social Cognitive Neuroscience and Leadership.” Leadership Quarterly 22 (6):1092–1106.10.1016/j.leaqua.2011.09.005Suche in Google Scholar
Welter, F., and D. Smallbone. 2006. “Exploring the Role of Trust in Entrepreneurial Activity.” Entrepreneurship Theory & Practice 30 (4):465–475.10.1111/j.1540-6520.2006.00130.xSuche in Google Scholar
Yamagishi, T., and M. Yamagishi. 1994. “Trust and Commitment in the United States and Japan.” Motivation & Emotion 18 (2):129–166.10.1007/BF02249397Suche in Google Scholar
Ye, Y., and Y. F. Jiang. 2009. “A Cross Case Study on the Impact of Trust of Venture Capital Institutions on New Venture Performance.” Managing World (10):152–163.Suche in Google Scholar
Yeung, N., C. B. Holroyd, and J. D. Cohen. 2005. “ERP Correlates of Feedback and Reward Processing in the Presence and Absence of Response Choice.” Cerebral Cortex 15 (5):535–544.10.1093/cercor/bhh153Suche in Google Scholar
Zacharakis, A. L., and G. D. Meyer. 2000. “The Potential of Actuarial Decision Models: Can They Improve the Venture Capital Investment Decision?” Journal of Business Venturing 15 (4):323–346.10.1016/S0883-9026(98)00016-0Suche in Google Scholar
Zaheer, A., B. McEvily, and V. Perrone. 1998. “Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance.” Organization Science 9 (2):141–159.10.1287/orsc.9.2.141Suche in Google Scholar
Appendix
A.1 Background
The requirements of venture capitalists (VCs) for the entrepreneurs (Es) in the phase of obtaining funds are as follows. Es manage the company according to the provisions set in the contract. Es have an obligation to regularly report information regarding finance and market to VCs. Major decisions, such as the appointment and dismissal of senior managers and development of a new market, should be notified to VCs. Es are responsible for technological security. Es make commitments to the requirements of VCs to obtain funds, promise to perform commitments to fulfill the duties in accordance with the agreed contents and strive to operate the start-ups.
EA: Es with a high level of behavioral consistency

EB: Es with a moderate level of behavioral consistency

EC: Es with a low degree of behavioral consistency

© 2018 Walter de Gruyter GmbH, Berlin/Boston
Artikel in diesem Heft
- Entrepreneurial Orientation, Control Systems, and New Venture Performance: A Dominant Logic Perspective
- A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry
- Cohort, Age and Business Cycle Effects in Entrepreneurship in Latin America
- Trust Cognition of Entrepreneurs’ Behavioral Consistency Modulates Investment Decisions of Venture Capitalists in Cooperation
Artikel in diesem Heft
- Entrepreneurial Orientation, Control Systems, and New Venture Performance: A Dominant Logic Perspective
- A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry
- Cohort, Age and Business Cycle Effects in Entrepreneurship in Latin America
- Trust Cognition of Entrepreneurs’ Behavioral Consistency Modulates Investment Decisions of Venture Capitalists in Cooperation