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On the governance of start-ups

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  • Ambec, S.

Abstract

This paper examines an entrepreneur-investor relationship in a stylized model where (i) investment needs are unknown ex ante and arise sequentially (ii) a major decision must be reached at a maturity strage, (iii) this decision depends on entrepreneur's private information, observable by the investor at some cost. The two partners agree on a corporate governance system which includes a split of futre cash-flows and an allocation of control on the above decision contingently on investment. It turns out that control is assigned to the entrepreneur for low investment levels and then switches to the investor when investment exceeds a threshold. Classification-JEL: G24; G32; L22

Suggested Citation

  • Ambec, S., 2004. "On the governance of start-ups," Working Papers 200406, Grenoble Applied Economics Laboratory (GAEL).
    • Handle: RePEc:gbl:wpaper:200406
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    References listed on IDEAS

    as
    1. Jean-Etienne de Bettignies, 2008. "Financing the Entrepreneurial Venture," Management Science, INFORMS, vol. 54(1), pages 151-166, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    CONTINGENT CONTROL; CORPORATE GOVERNANCE; VENTURE CAPITAL; BIOTECHNOLOGY;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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