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ALTRUISM AND ENTREPRENEURSHIP

Mary Kay Sullivan

Maryville College
Box 2813
Maryville, TN 37801

Telephone
615-981-8234

Principal Topics
This study attempted to confirm the existence of altruistic behavior among investors in new ventures as well as altruistic intention among potential investors. It also sought to quantify a "social return" factor that may compensate for a reduced economic return from altruistic venture capital investment.

A sample of 473 respondents provided data for the study. Of these, 283 had at some time invested capital in a new or growing venture; 190 had not. A measure of willingness to forgo some economic return for altruistic purposes was based on three scenarios involving some socially beneficial or "other-oriented" issue. A measure of actual investment behavior was drawn from direct responses as to why a specific venture capital investment had been made. T-tests were used to test hypotheses

Major Findings
Overall, there was a distinct willingness to forgo economic return to make venture investments that were seen as socially beneficial. Respondents, on average, were willing to give up between .037 and 052 out of a probable return of .20 in the investment scenarios. These "social returns" were significantly different from zero in all three scenarios. Other analysis showed that a distinct group of respondents were interested solely in economic return, however, and were not willing to give up any financial return for social purposes. A factor analysis confirmed the existence if an underlying altruistic or "other-centered" motive for investing,

Implications
This work lends support to studies suggesting that providers of venture capital may have other than purely economic motives, but goes beyond previous studies in examining investment behavior, not just intentions. It confirms the existence of altruism as a factor in some venture capital investments, thereby expanding traditional theory in economics and finance. on a practical level, this research suggests that the entrepreneur's cost of venture capital may be reduced when a social factor can be incorporated.

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