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

  • Jean-Etienne de Bettignies

    ()

    (Queen's School of Business, Queen's University, Kingston, Ontario K7L 3N6, Canada)

  • Gilles Chemla

    ()

    (Imperial College London, DRM-CNRS; and CEPR, Tanaka Business School, Imperial College London, South Kensington Campus, London SW7 2AZ, United Kingdom)

We provide new rationales for corporate venturing, based on competition for talented managers. As returns to venturing increase, firms engage in corporate venturing for reasons other than capturing these returns. First, higher venturing returns increase managerial compensation, to which firms respond by increasing 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, corporate venturing 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 corporate venturing.

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File URL: http://dx.doi.org/10.1287/mnsc.1070.0758
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 54 (2008)
Issue (Month): 3 (March)
Pages: 505-521

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Handle: RePEc:inm:ormnsc:v:54:y:2008:i:3:p:505-521
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  2. Manfred Dix & N�Stor Gandelman, 2007. "R&D Institutional Arrangements: Start-Up Ventures Versus Internal Lab," Manchester School, University of Manchester, vol. 75(2), pages 218-236, 03.
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  11. Ljungqvist, Alexander & Habib, Michel Antoine & Chemla, Gilles, 2007. "An Analysis of Shareholder Agreements," Economics Papers from University Paris Dauphine 123456789/4112, Paris Dauphine University.
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  16. 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.
  17. 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.
  18. Siegel, Robin & Siegel, Eric & MacMillan, Ian C., 1988. "Corporate venture capitalists: Autonomy, obstacles, and performance," Journal of Business Venturing, Elsevier, vol. 3(3), pages 233-247.
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