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The Division of Ownership in New Ventures

  • Dominique Demougin
  • Oliver Fabel

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.

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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-047.

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Length: 31 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2006-047
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