Abstract

Most research on trust in business angel investing has focused on the relationship between the business angel and the entrepreneur. However, the relationship between the business angel and the informants in the investment process has received less attention. In this paper we will contribute to theoretical understanding of the business angels’ investment decision-making by applying trust theory, and analyze how the context of the investment decision-making (e.g. the venture’s stage of development and the industry in which the venture is working) and the characteristics of the investor (e.g. the investor's financial sophistication and his/her level of activity on the market) affect the investor's choice of reliance on their network connections in identifying investment opportunities. We adopt the framework suggested by McAllister (1995) who distinguish between cognitive and affective foundations of trust, and argue that reliance on different types of network connections varies depending on investor-related and investment context. Further, we argue that investors’ choice of the reliance on their network connections in turn affects the outcomes of the investment process.

Share

COinS