Abstract

We investigate how specific behaviors by an entrepreneur during an initial interaction with a business angel investor build, damage or violate trust, and how the investor’s changes in his or her level of trust affects the decision to make an investment offer, or not. Our empirical analysis shows that entrepreneurs who receive offers are expected to exhibit a larger number of trust-building behaviors, a smaller number of trust-damaging behaviors, and to be unlikely to display trust-violating behaviors, as compared to those who do not receive an offer. We further observe that the offer of a trust-repair mechanism by the investor is a prerequisite for all of the entrepreneurs who damage or violate trust to receive an investment offer.

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