The role of regulatory focus and cognitive style in business angels’ evaluation of an investment opportunity

ABSTRACT This paper investigates how two cognitive mechanisms of business angels – regulatory focus and cognitive style – contribute to the process of evaluating an investment opportunity. Analyzing both qualitative and quantitative data collected from an international sample of business angels, indicates that both promotion and prevention regulatory foci are directly associated with the greater likelihood of a business angel positively evaluating an opportunity, and that planning cognitive style moderates these relationships. This research contributes to the existing literature on the phases of business angels’ investment process. The findings are also important for understanding the cognitive underpinnings of an early evaluation of an investment opportunity. Prior research has suggested that a business angel’s early evaluation of an investment opportunity critically influences success in raising equity financing, which is of critical importance for start-up firms in overcoming the liability of newness in their early stages of development.