CRG Seminar: Informal Governance of Resource Mobilisation in Technology Ventures in Africa

Entrepreneurs must access and mobilise resources - financial capital from investors, technical and marketing expertise possessed by employees, and social capital, which includes valuable information derived from social networks in order to identify and pursue profitable opportunities. A substantial body of research investigates how venture founders and their resource providers use formal mechanisms, such as written contracts and strategic alliances, to advance their interests and deter opportunistic behavior from counterparties. Surprisingly, however, there has been relatively little research on informal mechanisms that venture founders and their counterparties use to govern access and mobilisation of resources.

This omission is particularly salient because informal governance mechanisms predominate in the early stages of a venture’s life. At that stage, when the venture has not yet achieved market traction or become an incorporated concern, venture founders often access financial capital, human talent and information from their social networks based on trust. Furthermore, across many emerging countries, including in Africa, entrepreneurs may rely more on informal mechanisms rooted in 'gentlemen’s agreements', ethnic identity, and expectations of reciprocity, to access resources because formal capital markets are nascent, formal contract enforcement via the courts is ineffective, and government regulation is often unreliable.

This presentation by Dr Onojomo Akemu (University of Amsterdam) examines how venture founders and their key resource providers build and maintain trust in the early phases of venture life. He investigates this question in the context of technology ventures operating across Africa. Using a multiple case study of 100 technology venture founders, venture capital fund managers, and venture capital limited partners (LPs), Akemu finds that founders build trust with investors through actions that enhance their personal credibility and the quality of their stakeholder relationships.