Trust and success in venture capital Financing : an empirical analysis with German survey data

Duffner, Stefan and Schmid, Markus and Zimmermann, Heinz. (2009) Trust and success in venture capital Financing : an empirical analysis with German survey data. Kyklos, 62 (1). pp. 15-43.

[img] PDF - Published Version
Restricted to Repository staff only


Official URL: http://edoc.unibas.ch/dok/A5250405

Downloads: Statistics Overview


This paper presents an empirical analysis of the role of trust in the relationship between venture capitalist and entrepreneur. Following the social sciences literature, we try to differentiate between trust as an affective, value-based category from confidence which is understood as a backward-looking, evidence-based mechanism. Using data from a survey among German venture capitalists conducted in 2003, we analyze 111 financing relationships from 75 respondents. We find a significant reciprocal positive relationship between trust and success. Other significant determinants of trust include the perceived quality of the entrepreneur and credibility of information (two proxy variables for measuring confidence), the perceived importance of reputation and the stage of the entrepreneur's venture. The level of monitoring and control is identified as a substitute for trust. We address a potential endogeneity of trust and success by estimating a system of two simultaneous equations by 3SLS and find the results to be robust. Finally, we use data from a second survey conducted in 2006 to assess whether trust predicts success. In fact, our results indicate that a higher level of trust in 2003 is associated with a higher success rate in 2006.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Finanzmarkttheorie (Zimmermann)
UniBasel Contributors:Zimmermann, Heinz
Item Type:Article, refereed
Article Subtype:Research Article
Note:Publication type according to Uni Basel Research Database: Journal article
Identification Number:
edoc DOI:
Last Modified:21 Nov 2017 07:55
Deposited On:22 Mar 2012 14:03

Repository Staff Only: item control page