Preinvestment Negotiation Characteristics and Dismissal in Venture Capital-Backed Firms

In this study, we investigated idiosyncratic preinvestment process characteristics that influence the dismissal of management team members of venture capital-backed firms in the postinvestment phase by analyzing sixty-three portfolio firms. We considered two salient perspectives within the literature on governance of interfirm relationships: contractual and relational governance, which are related to positional and collaborative negotiation styles. Our findings indicate that positional bargaining in the preinvestment phase may be a reliable indicator that there is a greater risk that new venture team members will be dismissed when things get tough in the post-investment period.