The financing of alliance entrepreneurship
Journal of Business Venturing, 2020, vol. 35, issue 1
It is popular nowadays for entrepreneurial firms to advance their entrepreneurship outside their boundaries through alliances. This paper studies how the financing of entrepreneurship changes in strategic alliances. We model a financially constrained entrepreneur and a deep-pocket incumbent developing an innovative product through a strategic alliance, which generates externalities on the incumbent. We find that i) in contrast to traditional theories, the entrepreneur's financial constraint can be tightened by an increase in his endowment; ii) an outside investor is introduced as a third party to deal with the free-riding agency problem; and iii) the externalities have a significant effect on the design of financial claims in the alliance contract, and the incentive-compatible financial instruments are consistent with empirical observations.
Keywords: Alliance entrepreneurship; Financial contracting; Externality; Security design (search for similar items in EconPapers)
JEL-codes: G32 D86 D82 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:35:y:2020:i:1:s0883902617308790
Access Statistics for this article
Journal of Business Venturing is currently edited by S. Venkataraman
More articles in Journal of Business Venturing from Elsevier
Bibliographic data for series maintained by Haili He ().