Investor and Investee Conduct in the Risk Appraisal of High Technology New Ventures in the UK
AbstractThis paper examines, in a high technology context, how investor and investee behave, and interact, in the face of risk. The evidence on which it is based was obtained by fieldwork methods, over the period 2000-2, examining a sample of UK investors and investees active in high technology areas. The paper focuses on four questions: how risky are investments; what affects risk most; what aspects of innovation affect risk; what non-financial factors affect risk most? It finds that there was general agreement between investors and investees about which investments were relatively more or less risky. However, investees were shown to be relatively more risk averse than investors, right across the spectrum of investee types. When it came to factors affecting risk most, there was a clear difference between investors and investees. Agency risk was largely the concern of the investor. Business risk was the investee’s first priority, and agency risk did not figure large in the investee’s mind. This suggests that this component of risk had successfully been shifted on to the investor. Business risk was also a clear concern of investors, but they placed more emphasis on matters like market opportunities and sales, than did investees. The paper concludes that investors and investees generally see risk in the same light, but, that when views differ, this is explicable either by function (producer/ funder) or by relative risk aversion.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0205.
Date of creation: Feb 2002
Date of revision:
Contact details of provider:
Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
Phone: 01334 462420
Fax: 01334 462438
Web page: http://crieff.wordpress.com/
More information through EDIRC
Venture Capital; Risk Management; High-Technology; Fieldwork;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-ENT-2005-06-14 (Entrepreneurship)
- NEP-FIN-2005-06-14 (Finance)
- NEP-FMK-2005-06-14 (Financial Markets)
- NEP-INO-2005-06-14 (Innovation)
- NEP-RMG-2005-06-14 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gavin C Reid, 1994. "Fast Growing Small Entrepreneurial Firms and their Venture Capital Backers: an Applied Principal-Agent Analysis," CRIEFF Discussion Papers 9421, Centre for Research into Industry, Enterprise, Finance and the Firm.
- Gavin C. Reid, 1999.
"The application of principal-agent methods to investor-investee relations in the UK venture capital industry,"
Taylor & Francis Journals, vol. 1(4), pages 285-302, October.
- Gavin C Reid, 1998. "The Application of Principal-Agent Methods to Investor-Investee Relations in the UK Venture Capital Industry," CRIEFF Discussion Papers 9810, Centre for Research into Industry, Enterprise, Finance and the Firm.
- Yuk-Shee Chan., 1982.
"On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information,"
Research Program in Finance Working Papers
127, University of California at Berkeley.
- Chan, Yuk-Shee, 1983. " On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information," Journal of Finance, American Finance Association, vol. 38(5), pages 1543-68, December.
- Gavin C. Reid, 2002. "Investor Conduct Towards New High Technology Firms: UK Evidence on How Risk is Managed," CRIEFF Discussion Papers 0206, Centre for Research into Industry, Enterprise, Finance and the Firm.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).
If references are entirely missing, you can add them using this form.