Understanding how entrepreneur behaviors affect venture capitalist decision making, human capital, and venture performance in high potential new ventures : the role of charismatic leadership
Ciavarella, Mark A.
MetadataShow full item record
The effects of the entrepreneur on venture stakeholders and performance can be determined by his/her ability to obtain, coordinate, and effectively distribute two sets of resources particularly critical to the survival of the new venture - financial and human. How and when the lead entrepreneur is able to assemble these resources and utilize them in such a way as to adapt to changes in the external environment should lead to higher levels of firm performance. As such, this dissertation sought to answer whether or not there are any factors with respect to the entrepreneur’s leadership behaviors that facilitate or hinder his/her ability to obtain and retain financial (venture capital) and human resources. One particular leadership construct parallels the qualifications sought by both venture capitalists and employees - charismatic leadership. As defined here, charismatic leadership is comprised of five behavioral elements - strategic vision, recognition of environmental constraints, being sensitive to employee needs, undertaking a personal risk to build trust, and exhibiting unconventional behavior through high levels of energy and confidence. Two studies were developed to investigate (1) the relationship between a charismatic leadership style and venture capitalist decision making and (2) the effects of a charismatic leadership style on employees’ organizational commitment, satisfaction with leadership, and turnover intentions of employees, and the performance of the new venture. The results show that the preferences of venture capitalists and employees both converge and diverge. Possessing a strategic vision and being goal oriented has positive effects on both venture capitalist decision making and employee attitudes. Recognizing environmental constraints had mixed effects on venture capitalist decision making and only affected employees’ satisfaction with leadership. Being sensitive to member needs had no effect on venture capitalist decision making, but positively affected employees’ satisfaction with leadership. Personal risk only affected the venture capitalist’s expectations of removing the entrepreneur prior to an exit event. Unconventional behavior only approached statistical significance in predicting the turnover intentions of employees. Only sensitivity to environmental constraints affected new venture performance, yet the relationship was negative. The stage of venture development did not moderate the effects of an entrepreneur’s charismatic leadership style on venture performance.