Entrepreneurship and the Division of Ownership in New Ventures

18 Pages Posted: 18 Jan 2007  

Dominique Demougin

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Governance & Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Oliver Fabel

Chair for International Personnel Management, Institute of Business Administration, Faculty of Economics and Business, University of Vienna

Abstract

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.

Suggested Citation

Demougin, Dominique and Fabel, Oliver, Entrepreneurship and the Division of Ownership in New Ventures. Journal of Economics & Management Strategy, Vol. 16, No. 1, pp. 111-128, Spring 2007. Available at SSRN: https://ssrn.com/abstract=957923 or http://dx.doi.org/10.1111/j.1530-9134.2006.00134.x

Dominique Demougin (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Governance & Economics ( email )

International University Schloss Reichartshausen
Campus Wiesbaden, Soehnleinstrasse 8A
Wiesbaden, 65201
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Muenchen, 81679
Germany

Oliver Fabel

Chair for International Personnel Management, Institute of Business Administration, Faculty of Economics and Business, University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A1090
Austria
+43-1-4277-38161 (Phone)

HOME PAGE: http://ipersonal.univie.ac.at/index.php?id=home1

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