When agency theory weds prospect theory! How does VC–entrepreneur's dyadic interplay impact internationalization of a born global firm?

This work theorizes about the dyadic interplay between entrepreneurs and VCs and how these individual-level interactions lead to firm-level outcomes such as the decision to internationalize. We integrate agency and prospect theories to explain how different combinations of risk preferences between entrepreneurs and VCs can reduce or increase agency effects and the subsequent effect on the propensity to internationalize. Using prospect theory's utility curve, we conceptualize the reference point as an individual's aspiration to illustrate how higher entrepreneurial aspiration (reference point shifting) helps mitigate agency effects and increases the propensity to internationalize. We further enhance the explanatory power of our theory by introducing the notion of (shared) mental models and cross-understanding to the internationalization literature. Based on six different scenarios, we provide several testable propositions and future research directions that can enrich international entrepreneurship theory and practice.