Resources and Relationships in Entrepreneurship: An Exchange Theory of the Development and Effects of the Entrepreneur-Investor Relationship

Laura  Huang; Andrew P. Knight

Article | Academy of Management Review

Resources and Relationships in Entrepreneurship: An Exchange Theory of the Development and Effects of the Entrepreneur-Investor Relationship

by Laura Huang and Andrew P. Knight

Abstract

We develop a theoretical model, grounded in exchange theory, about the process through which relationships between entrepreneurs and investors develop and influence the growth of new ventures. Our theory highlights the multifaceted relationships that entrepreneurs and investors share—comprising both affective and instrumental dimensions—and the bidirectional exchanges of social and financial resources that build these relationships over time. An exchange theory perspective sheds light on the emergence of different patterns of relationship development over time and how different kinds of resource exchange contribute to new venture growth, contingent on the core problems that a venture faces at a given stage of development. We discuss implications of an exchange perspective on resources and relationships in entrepreneurship for theory, research, and practice.

Keywords: Entrepreneurship; Relationships; Business Startups; Business and Shareholder Relations; Theory;

Format: Print

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Citation:

Huang, Laura, and Andrew P. Knight. "Resources and Relationships in Entrepreneurship: An Exchange Theory of the Development and Effects of the Entrepreneur-Investor Relationship." Academy of Management Review 42, no. 1 (January 2017): 80–102.

Boxed.com (“Boxed”) is an ambitious e-commerce retailer start-up, founded by visionary CEO Chieh Huang in 2013. From starting in Huang’s garage in 2013, to winning Emerging E-Retailer of the Year in 2016, to having 4 operational distribution centers in 2018, Boxed used a variety of strategies in order to gain customers and grow its presence. This case explores the journey that the scrappy, new entrant navigated as it competed against large, goliath players in an already established retail and e-commerce industry.

Frustrated by an inability to convince existing venture capital firms to invest in companies led by women, people of color, and LGBT founders, Arlan Hamilton started her own firm, Backstage Capital, in 2015. Hamilton understood the untapped potential of companies run by underrepresented founders, a group historically excluded from venture capital funding, and was eager to demonstrate the significant returns on investment in such companies. This case explores Hamilton’s nontraditional VC background and her mission to fund startups where at least one founder of the company identifies as a woman, person of color, or LGBT. Now, three years after its founding, Hamilton is considering launching both an accelerator and a fund that will invest exclusively in Black women.

Article | Journal of Experimental Psychology: General | April 2019

Mitigating Malicious Envy: Why Successful Individuals Should Reveal Their Failures

Alison Wood Brooks, Karen Huang, Nicole Abi-Esber, Ryan W. Buell, Laura Huang and Brian Hall

People often feel malicious envy, a destructive interpersonal emotion, when they compare themselves to successful peers. Across three online experiments and a field experiment of entrepreneurs, we identify an interpersonal strategy that can mitigate feelings of malicious envy in observers: revealing one’s failures. Despite a general reluctance to reveal one’s failures—as they are happening and after they have occurred—across four experiments, we find that revealing both successes and failures encountered on the path to success (compared to revealing only successes) decreases observers’ malicious envy. This effect holds regardless of the discloser’s status and cannot be explained by a decrease in perceived status of the individual. Then, in a field experiment at an entrepreneurial pitch competition, where pride displays are common and stakes are high, we find suggestive evidence that learning about the failures of a successful entrepreneur decreases observers’ malicious envy while increasing their benign envy in addition to decreasing their perceptions of the entrepreneur’s hubristic pride (i.e., arrogance) while increasing their perceptions of the entrepreneur’s authentic pride (i.e., confidence). These findings align with previous work on the social-functional relation of envy and pride. Taken together, our results highlight how revealing failures encountered on the way to success can be a counterintuitive yet effective interpersonal emotion regulation strategy.

Keywords: Emotions; Perception; Interpersonal Communication; Communication Strategy;

Citation:

Brooks, Alison Wood, Karen Huang, Nicole Abi-Esber, Ryan W. Buell, Laura Huang, and Brian Hall. "Mitigating Malicious Envy: Why Successful Individuals Should Reveal Their Failures." Journal of Experimental Psychology: General 148, no. 4 (April 2019): 667–687. View Details

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Resources and Relationships in Entrepreneurship: An Exchange Theory of the Development and Effects of the Entrepreneur-Investor Relationship

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