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The division of ownership in new ventures

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  • Demougin, Dominique M.
  • Fabel, Oliver

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 M. & Fabel, Oliver, 2006. "The division of ownership in new ventures," SFB 649 Discussion Papers 2006-047, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2006-047
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Erik Lehmann, 2006. "Does Venture Capital Syndication Spur Employment Growth and Shareholder Value? Evidence from German IPO Data," Small Business Economics, Springer, vol. 26(5), pages 455-464, June.

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    More about this item

    Keywords

    new ventures; tripartite incentive contract; consulting contract; partnerships;
    All these keywords.

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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