An Inductively Derived Theory of Entrepreneur-Investor Rivalry

Entrepreneurs and investors sometimes battle for control of new ventures when their post-deal relationships deteriorate, a phenomenon that we describe as entrepreneur-investor rivalry (EIR). Theoretical accounts of entrepreneurs’ and investors’ relationships preclude the potential for rivalry, yet it can and does happen. To address the disconnect between theory and practice, we develop an initial theory of EIR from the in-depth, qualitative analysis of rivalry to control a renowned craft distillery. Our theory elaborates why, how, and to what end EIR manifests, attending to the contextual factors, interaction dynamics, and rival attributes that shape the outcomes of three sequential stages and the overall rivalry process. In strengthening understanding of EIR, we improve extant theory’s capacity to explain such rivalry, provide practical prescriptions to mitigate or avoid it, and till fertile ground on which to invigorate its study. Most importantly, we provide a theoretical foundation to invigorate research on entrepreneur-investor rivalry and other relational dynamics of importance to venture resource mobilization, moving beyond assumptions that we “know all there is to know” about these relationships.