When Do Employees Become Entrepreneurs?
Stanford GSB Research Paper No. 1770
61 Pages Posted: 11 Jun 2002
Many new firms are started by entrepreneurs who got the idea while working for their previous employer. Sometimes employers also agree to develop their employees' ideas internally. This paper develops a multi-task incentives model to analyze optimal corporate strategies towards employee innovations. The model explains when employees become entrepreneurs (sometimes even involuntarily); when they become intrapreneurs, managing internal ventures; when they become managers of a corporate spin-off; and when they are denied all of these options. Important determinants for these choices are the allocation of intellectual property rights, and the availability of outside resources, such as venture capital.
JEL Classification: M13, L2, O3, D23, G31
Suggested Citation: Suggested Citation