Venture capital contracting in theory and practice: Implications for entrepreneurship research

Burchardt, J., Hommel, U., Kamuriwo, D. S. & Billitteri, C. (2016). Venture capital contracting in theory and practice: Implications for entrepreneurship research. Entrepreneurship: Theory and Practice, 40(1), pp. 25-48. doi: 10.1111/etap.12104

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Abstract

This article provides a comprehensive theoretical and empirical literature review of venture capital contracts. This outlines the differences between theoretical and practical uses of contract designs; that is, (1) how does the choice of securities give rise to different adverse selection problems in terms of attracting different types of entrepreneurial companies; how does the choice of securities in conjunction with cash flow and control rights provisions affect (2) the effort levels by the entrepreneur and the investor; and (3) ultimately affect entrepreneurial outcomes. This article highlights the major discrepancies between theory and practice and points out potential avenues for further research.

Item Type: Article
Additional Information: This is the accepted version of the following article: Burchardt, J, Hommel, U, Burchardt, J., Hommel, U., Kamuriwo, D. S. and Billitteri, C. (2016), Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research. Entrepreneurship Theory and Practice, 40: 25–48., which is published in final form at http://dx.doi.org/10.1111/etap.12104. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Subjects: H Social Sciences > HD Industries. Land use. Labor
Divisions: Cass Business School > Faculty of Management
URI: http://openaccess.city.ac.uk/id/eprint/6065

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