Entrepreneurship and the Division of Ownership in New Ventures
EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Governance & Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Chair for International Personnel Management, Institute of Business Administration, Faculty of Economics and Business, University of Vienna
Journal of Economics & Management Strategy, Vol. 16, No. 1, pp. 111-128, Spring 2007
The current study investigates a tripartite incentive contract between an innovator supplying an intellectual asset, a professional assigned to productive tasks, and a consulting firm specializing in matching ideas and professional skills. A rather simple pure tripartite partnership implements the consultant's expected profit maximum and maximizes the project's expected surplus. The liquidity-constrained professional is compensated by receiving a share of one half in the new venture. The consultant's and the innovator's shares reflect the relative value of search. However, the consultant's optimal search effort to find an appropriate production partner is inefficiently low.
Number of Pages in PDF File: 18
Date posted: January 18, 2007