Fairness norms and self-interest in venture capital/entrepreneur contracting and performance

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Citation (Scopus)

Abstract

We consider the combined impact of agency problems and behavioural factors on venture capital/entrepreneur contracting and performance. Particularly, we develop a behavioural game-theoretic model in which a venture capitalist and an entrepreneur negotiate over their respective equity shares, and then exert value-adding efforts in running the business. Double-sided moral hazard exists in that both parties may exert sub-optimal effort (the =shirking' problem). We demonstrate that, for a given level of VC-ability, an increase in social fairness norms induces the VC to offer more equity to the entrepreneur, which in turn induces the entrepreneur to exert more effort. This improves venture performance.
Original languageEnglish
Title of host publicationEntrepreneurship
Subtitle of host publicationMotivation, Performance and Risk
PublisherNova Science Publishers
Pages73-90
Number of pages18
ISBN (Print)9781614701484
Publication statusPublished - Dec 2011

Fingerprint

Venture capital
Contracting
Entrepreneurs
Fairness
Equity
Venture
Shirking
Game-theoretic models
Venture capitalists
Moral hazard
Agency problems
Factors

Cite this

Fairchild, R. (2011). Fairness norms and self-interest in venture capital/entrepreneur contracting and performance. In Entrepreneurship: Motivation, Performance and Risk (pp. 73-90). Nova Science Publishers.

Fairness norms and self-interest in venture capital/entrepreneur contracting and performance. / Fairchild, R.

Entrepreneurship: Motivation, Performance and Risk. Nova Science Publishers, 2011. p. 73-90.

Research output: Chapter in Book/Report/Conference proceedingChapter

Fairchild, R 2011, Fairness norms and self-interest in venture capital/entrepreneur contracting and performance. in Entrepreneurship: Motivation, Performance and Risk. Nova Science Publishers, pp. 73-90.
Fairchild R. Fairness norms and self-interest in venture capital/entrepreneur contracting and performance. In Entrepreneurship: Motivation, Performance and Risk. Nova Science Publishers. 2011. p. 73-90
Fairchild, R. / Fairness norms and self-interest in venture capital/entrepreneur contracting and performance. Entrepreneurship: Motivation, Performance and Risk. Nova Science Publishers, 2011. pp. 73-90
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