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Corporate Venturing, Allocation of Talent, and Competition for Star Managers

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  • Jean-Etienne De Bettignies

    (QUARG - Queen's University - Queen's University, Kingston, Ontario)

  • Gilles Chemla

    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)

Abstract

We provide new rationales for corporate venturing (CV), based on competition for talented managers. As returns to venturing increase, firms engage in CV for reasons other than capturing these returns. First, higher venturing returns increase managerial compensation, to which firms respond by increasing the power of incentives. Managers increase effort, prompting firms to reallocate them to new ventures, where the marginal product of effort is highest. Second, as returns to venturing become large, CV emerges as a way to recruit/retain managers who would otherwise choose alternative employment. We derive several testable empirical predictions about the determinants and structure of CV.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00365942.

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Date of creation: 05 Mar 2008
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Publication status: Published, Management Science, 2008, Vol. 54, Issue n°3, pp. 505-521
Handle: RePEc:hal:journl:halshs-00365942

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00365942/en/
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Keywords: corporate venture capital; venture capital; failure; competition; entrepreneur; manager;

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References

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  8. Paul Oyer & Scott Schaefer, 2004. "Why Do Some Firms Give Stock Options to All Employees?: An Empirical Examination of Alternative Theories," NBER Working Papers 10222, National Bureau of Economic Research, Inc.
  9. Sykes, Hollister B., 1986. "The anatomy of a corporate venturing program: Factors influencing success," Journal of Business Venturing, Elsevier, vol. 1(3), pages 275-293.
  10. Bharat N. Anand & Alexander Galetovic & Alvaro Stein, 2004. "Incentives Versus Synergies in Markets for Talent," Documentos de Trabajo 179, Centro de Economía Aplicada, Universidad de Chile.
  11. Thomas Hellman & Laura Lindsey & Manju Puri, 2004. "Building Relationships Early: Banks in Venture Capital," NBER Working Papers 10535, National Bureau of Economic Research, Inc.
  12. Chemla, Gilles & Habib, Michel Antoine & Ljungqvist, Alexander P, 2002. "An Analysis of Shareholder Agreements," CEPR Discussion Papers 3457, C.E.P.R. Discussion Papers.
  13. Thomas Hellmann, 2007. "When Do Employees Become Entrepreneurs?," Management Science, INFORMS, vol. 53(6), pages 919-933, June.
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Cited by:
  1. Mehri, Meryem & Jouaber, Kaouther, 2012. "A Theory of Profit Sharing Ratio under Adverse Selection: The Case of Islamic Venture Capital," Economics Papers from University Paris Dauphine 123456789/9551, Paris Dauphine University.
  2. Stefan Arping & Sonia Falconieri, 0000. "Strategic versus Financial Investors: The Role of Strategic Objectives in Financial Contracting," Tinbergen Institute Discussion Papers 09-036/2, Tinbergen Institute.
  3. Loss, Frédéric & Renucci, Antoine, 2008. "Reputation Capital, Financial Capital, and Transition to Entrepreneurship," Economics Papers from University Paris Dauphine 123456789/2945, Paris Dauphine University.
  4. Thomas Hellmann & Veikko Thiele, 2011. "Incentives and Innovation: A Multitasking Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 78-128, February.
  5. Yuliy Sannikov & Xavier Gabaix & Tomasz Sadzik & Alex Edmans, 2010. "Dynamic Incentive Accounts," 2010 Meeting Papers 1207, Society for Economic Dynamics.
  6. Alfonso Gambardella & Claudio Panico, 2009. "Designing Governance Mechanisms for Knowledge-Intensive," KITeS Working Papers 019, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2009.
  7. Da Rin, M. & Hellmann, T. & Puri, M.L., 2011. "A Survey of Venture Capital Research," Discussion Paper 2011-044, Tilburg University, Tilburg Law and Economic Center.
  8. Dominique Dufour & Eric Nasica & Dominique Torre, 2013. "Syndication in private equity industry: comparing the strategies of independent and captive venture capitalists," Working Papers halshs-00853695, HAL.
  9. Hong, Suting, 2013. "Competition, syndication, and entry in the venture capital market," Working Papers 13-49, Federal Reserve Bank of Philadelphia.
  10. Dominique Dufour & Eric Nasica & Dominique Torre, 2014. "Rendements financiers versus rendements stratégiques : une comparaison des stratégies de syndication des capital-risqueurs captifs et indépendants," Working Papers halshs-00924748, HAL.
  11. Nikolowa, Radoslawa, 2014. "Developing new ideas: Spin-outs, spinoffs, or internal divisions," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 70-88.

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