Firm Reputation And Employee Startups

Jan Zabojnik

No 1362, Working Paper from Economics Department, Queen's University

Abstract: This paper studies a repeated-game model in which firms can build a reputation for rewarding innovative employees. In any Pareto efficient equilibrium, low-value innovations get developed in established firms, while high-value innovations get developed in startups. The threshold level can be discontinuous, so otherwise similar firms may exhibit very different levels of innovation. The paper also shows that the optimal incentive contract for innovative employees has an option-like form, and that a firm may want to worsen the distribution of possible innovations. The model's predictions are consistent with a broad set of observed regularities regarding the creation of employee startups.

Keywords: venture capital; Startups; innovation; reputation (search for similar items in EconPapers)
JEL-codes: L14 L26 M13 O31 O34 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2016-07
New Economics Papers: this item is included in nep-cta, nep-ent, nep-ind, nep-ino, nep-knm, nep-mic and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1362.pdf First version 2016 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1362

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().