Abstract

The relationship between resource slack and performance is heavily debated and multiple theoretical frameworks and empirical studies provide contradictory insights (George, 2005). Prior studies on the relationship between slack and performance in entrepreneurial ventures have generally assumed that these ventures have similar shareholder structures or that different shareholders have similar preferences with regard to slack allocation, both of which are unlikely. Distinguishing between different types of shareholders is critical to enhance our understanding of the relationship between slack and performance (Kim et al., 2008). In this study we will focus on two important shareholders in entrepreneurial ventures, namely venture capitalists and angel investors. Through monitoring and active involvement in strategic decision making (Sapienza, 1992; Sapienza et al., 1996) these investors are likely to minimize some of the negative effects (including organizational complacency, over-optimism, and dampening incentives for experimentation) of holding too much slack as advocated by agency and resource constraints theories. We specifically focus on the following research question: How does the presence of venture capitalists (VCs) and angel investors (BAs) influence the relationship between slack and performance?

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