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

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  • 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)

Abstract

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.

Suggested Citation

  • Jean-Etienne de Bettignies & Gilles Chemla, 2008. "Corporate Venturing, Allocation of Talent, and Competition for Star Managers," Management Science, INFORMS, vol. 54(3), pages 505-521, March.
  • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:3:p:505-521
    DOI: 10.1287/mnsc.1070.0758
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