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Agency and Governance in Strategic Entrepreneurship

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  • David B. Audretsch
  • Erik E. Lehmann
  • Lawrence A. Plummer

Abstract

This paper aims to highlight the opportunity to contribute to our understanding of strategic entrepreneurship by exploring the construct through the lens of agency theory. In particular, we claim a fundamental link between a new venture's control of critical resources and the distribution of equity between the principal and agent. According to agency theory, assigning top executives ownership in the firm provides arrangements that are compatible with the incentives of the owners of the firm. This paper suggests that agency theory has special relevance when considered in a strategic entrepreneurship context. This is because the function of managers in entrepreneurial new ventures is fundamentally different from their counterparts in large established, incumbent corporations. While both types of managers have to provide managerial and organizational expertise, managers in entrepreneurial new ventures have an additional function that is essential to the competitive advantage and performance of the new venture—providing knowledge and human capital, which, in many cases, is intrinsically linked to the capital resources of the new venture. Our framework is tested using patent ownership as a proxy for both relationship–specific investments and indispensable human capital of the top manager of the new venture. The empirical results support the main hypotheses posited by the entrepreneurial governance model. In particular, patent ownership of the top manager significantly increases the percentage of equity held, while the number of patents held by the firm significantly decreases the percentage of ownership.

Suggested Citation

  • David B. Audretsch & Erik E. Lehmann & Lawrence A. Plummer, 2009. "Agency and Governance in Strategic Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 33(1), pages 149-166, January.
    • Handle: RePEc:sae:entthe:v:33:y:2009:i:1:p:149-166
    DOI: 10.1111/j.1540-6520.2008.00284.x
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    1. David B. Audretsch & Erik E. Lehmann, 2013. "Corporate governance in newly listed companies," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 9, pages 179-206, Edward Elgar Publishing.
    2. James A. Cunningham & Matthias Menter & Katharine Wirsching, 2019. "Entrepreneurial ecosystem governance: a principal investigator-centered governance framework," Small Business Economics, Springer, vol. 52(2), pages 545-562, February.
    3. Zoltán J. Ács & Pontus Braunerhjelm & David B. Audretsch & Bo Carlsson, 2015. "The knowledge spillover theory of entrepreneurship," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 7, pages 129-144, Edward Elgar Publishing.
    4. Yangyang Yu & Yong Qin & Zeshui Xu & Marinko Škare, 2022. "Bibliometric analysis of strategic entrepreneurship literature," International Entrepreneurship and Management Journal, Springer, vol. 18(4), pages 1475-1502, December.
    5. Curt B. Moore & R. Greg Bell & Igor Filatotchev, 2010. "Institutions and Foreign IPO Firms: The Effects of “Home†and “Host†Country Institutions on Performance," Entrepreneurship Theory and Practice, , vol. 34(3), pages 469-490, May.
    6. Adel Elgharbawy & Magdy Abdel-Kader, 2013. "Enterprise governance and value-based management: a theoretical contingency framework," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(1), pages 99-129, February.
    7. Erik Lehmann & Thorsten Braun & Sebastian Krispin, 2012. "Entrepreneurial human capital, complementary assets, and takeover probability," The Journal of Technology Transfer, Springer, vol. 37(5), pages 589-608, October.
    8. Andrea Signori & Silvio Vismara, 2017. "Stock-financed M&As of newly listed firms," Small Business Economics, Springer, vol. 48(1), pages 115-134, January.
    9. Anna Long & Matthew S. Wood & Daniel L. Bennett, 2023. "Entrepreneurial organizing activities and nascent venture performance," Small Business Economics, Springer, vol. 60(2), pages 433-461, February.
    10. Matthew J. Mazzei & David J. Ketchen & Christopher L. Shook, 2017. "Understanding strategic entrepreneurship: a “theoretical toolbox” approach," International Entrepreneurship and Management Journal, Springer, vol. 13(2), pages 631-663, June.
    11. Deryck J van Rensburg, 2013. "Is Strategic Entrepreneurship a Pleonasm?," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 4(1), pages 15-27, February.
    12. Lehmann, Erik, 2018. "Corporate governance," UO Working Papers 01-18, University of Augsburg, Chair of Management and Organization.
    13. Douglas J. Cumming & J. Ari Pandes & Michael J. Robinson, 2015. "The Role of Agents in Private Entrepreneurial Finance," Entrepreneurship Theory and Practice, , vol. 39(2), pages 345-374, March.
    14. Hien Thu Tran & Enrico Santarelli, 2014. "Capital constraints and the performance of entrepreneurial firms in Vietnam," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(3), pages 827-864.
    15. Matthew J. Mazzei & David J. Ketchen & Christopher L. Shook, 0. "Understanding strategic entrepreneurship: a “theoretical toolbox” approach," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-33.
    16. Walters, Bruce A. & Le, Son A. & Kroll, Mark, 2015. "Post-IPO governance and top management team rent generation and appropriation," Journal of Business Research, Elsevier, vol. 68(1), pages 47-55.
    17. R. Duane Ireland & Michael C. Withers & Joseph S. Harrison & David S. Boss & Richard Scoresby, 2023. "Strategic Entrepreneurship: A Review and Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(2), pages 495-523, March.
    18. Gurău, Călin & Dana, Leo-Paul, 2020. "Financing paths, firms’ governance and corporate entrepreneurship: Accessing and applying operant and operand resources in biotechnology firms," Technological Forecasting and Social Change, Elsevier, vol. 153(C).

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