Accounting for Risk: developing a new research agenda for risk appraisal in high-technology ventures
AbstractThis work concerns the development of new methods of accounting for risk in high-technology ventures. The paper enquires into attitudes to risk and skills at risk management, in the relationship between high-technology firms and their venture capital backers. The basic prescription behind the proposed approach, building on work by the authors and co-workers [Reid (1996,1999), Reid, Terry and Smith (1997)], and other recent developments [e.g. Fiet (1995a,b)], is that as the venture capital industry matures, so should the techniques which high-technology firms and their venture capital backers use for risk management. If total risk is split up into innovation risk, business risk and agency risk, the main category of risk which hitherto the venture capitalist has sought to attenuate is agency risk. This has been addressed through improved management accounting systems, post-investment, and pre-commitment to the installation of such systems, pre-investment. However, success in this area has been incomplete, and attention to business and innovation risk has been severely limited. Lack of overall success in risk handling has, as a consequence, been a major cause of failure to provide adequate levels of outside finance for high-technology ventures, if appropriate yardstick comparison is made with US practise. This paper proposes a new research agenda, and a corresponding methodology, for investigating methods used for managing innovation, business and agency risks in investor-investee relations.
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 9915.
Date of creation: Oct 1999
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
Risk management; high-technology firms; accounting systems; economic;
Find related papers by JEL classification:
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
- M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
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.:
- Murray, Gordon C. & Lott, Jonathan, 1995. "Have UK venture capitalists a bias against investment in new technology-based firms?," Research Policy, Elsevier, vol. 24(2), pages 283-299, March.
- G. C. Reid & N. G. Terry & J. A. Smith, 1997.
"Risk management in venture capital investor?investee relations,"
European Journal of Finance,
Taylor and Francis Journals, vol. 3(1), pages 27-47.
- Gavin C Reid & Nicholas G Terry & Julia A Smith, 1995. "Risk Management in Venture Capital Investor-Investee Relations," CRIEFF Discussion Papers 9505, 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 and 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.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Fiet, James O., 1995. "Reliance upon informants in the venture capital industry," Journal of Business Venturing, Elsevier, vol. 10(3), pages 195-223, May.
- Ruhnka, John C. & Young, John E., 1991. "Some hypotheses about risk in venture capital investing," Journal of Business Venturing, Elsevier, vol. 6(2), pages 115-133, March.
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.