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Are Entrepreneurs Overburdened? Exploring the Agency Dilemma in an Entrepreneurial Setting

Bulaj, Ervis LU and Hafdioui, Nour (2019) BUSN09 20191
Department of Business Administration
Abstract
Entrepreneurial finance is of key importance for young firms and as in any other hierarchical structure, it is strongly linked with the agency dilemma. While the principal-agent dilemma has been well documented in large companies, there is a limited contribution focused on agency theory within start-ups and young firms. When considering new enterprises, the key actors do not fit quite so neatly into the existing frameworks because the entrepreneurs are also stockholders of their ventures. We believe that this might have implications regarding the agency control mechanisms with regards to the costs which are incurred by the agent. Thus, this research aimed to examine agency theory within the context of the investor-entrepreneur... (More)
Entrepreneurial finance is of key importance for young firms and as in any other hierarchical structure, it is strongly linked with the agency dilemma. While the principal-agent dilemma has been well documented in large companies, there is a limited contribution focused on agency theory within start-ups and young firms. When considering new enterprises, the key actors do not fit quite so neatly into the existing frameworks because the entrepreneurs are also stockholders of their ventures. We believe that this might have implications regarding the agency control mechanisms with regards to the costs which are incurred by the agent. Thus, this research aimed to examine agency theory within the context of the investor-entrepreneur relationship. By employing a qualitative, multiple-case study design we aimed to discover which mechanisms are used by investors (principal) to control the entrepreneur’s (agent’s) behavior, and how these mechanisms affect the agent. We find that while incentives, monitoring, and screening are also common within young firms, other agency control mechanisms have weak applicability in this context. The effects of these mechanisms are manifold and relate mainly to the risks which are beared by the entrepreneurs and the necessary efforts required from them to ensure the progress of their relationship. Besides contributing to academia by exploring the agency dilemma in an overlooked area, our findings can be useful to entrepreneurs when considering financing options for their ventures. (Less)
Please use this url to cite or link to this publication:
author
Bulaj, Ervis LU and Hafdioui, Nour
supervisor
organization
course
BUSN09 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
agency theory, entrepreneurs, agency costs, agency control mechanisms, entrepreneurial finance, venture capitalists, business angels
language
English
id
8988377
date added to LUP
2019-06-27 15:32:03
date last changed
2019-06-27 15:32:03
@misc{8988377,
  abstract     = {{Entrepreneurial finance is of key importance for young firms and as in any other hierarchical structure, it is strongly linked with the agency dilemma. While the principal-agent dilemma has been well documented in large companies, there is a limited contribution focused on agency theory within start-ups and young firms. When considering new enterprises, the key actors do not fit quite so neatly into the existing frameworks because the entrepreneurs are also stockholders of their ventures. We believe that this might have implications regarding the agency control mechanisms with regards to the costs which are incurred by the agent. Thus, this research aimed to examine agency theory within the context of the investor-entrepreneur relationship. By employing a qualitative, multiple-case study design we aimed to discover which mechanisms are used by investors (principal) to control the entrepreneur’s (agent’s) behavior, and how these mechanisms affect the agent. We find that while incentives, monitoring, and screening are also common within young firms, other agency control mechanisms have weak applicability in this context. The effects of these mechanisms are manifold and relate mainly to the risks which are beared by the entrepreneurs and the necessary efforts required from them to ensure the progress of their relationship. Besides contributing to academia by exploring the agency dilemma in an overlooked area, our findings can be useful to entrepreneurs when considering financing options for their ventures.}},
  author       = {{Bulaj, Ervis and Hafdioui, Nour}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Are Entrepreneurs Overburdened? Exploring the Agency Dilemma in an Entrepreneurial Setting}},
  year         = {{2019}},
}