Small Business Economics

, Volume 47, Issue 2, pp 331–344 | Cite as

The impact of venture capital on governance decisions in collaborations with start-ups

  • Albert JolinkEmail author
  • Eva Niesten


This article addresses solutions for contractual hazards in the formation and operation of collaborations with start-ups. We suggest that venture capitalists (VCs) may serve as a mechanism to mitigate contractual hazards and act as a substitute for equity sharing in joint ventures. This article is to our knowledge the first to address the impact of VC on governance decisions for start-ups. We analyse 5405 bilateral collaborations from the SDC database for the period 2009–2014 and find that VC-backed firms are less likely to share equity in collaborations. In a subset of 564 VC-backed firms, start-ups are less likely to choose a joint venture as a governance structure in comparison with established firms. When firms are backed by a larger number of VCs, they are also less likely to share equity in a collaboration. This article improves our understanding of the effect of VC on governance decisions in inter-firm relations and presents evidence of a trade-off between joint venture equity and VC equity in the formation of collaborations. It also shows that this trade-off becomes even more substantial when syndication of VCs is present.


Strategic alliances Transaction cost economics Venture capital Start-ups Governance 

JEL Classifications

D23 D74 G24 L14 L24 M13 


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Coventry Business SchoolCoventry UniversityCoventryUK
  2. 2.Manchester Institute of Innovation Research, Alliance Manchester Business SchoolThe University of ManchesterManchesterUK

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