Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research

Jens Burchardt, Ulrich Hommel, Dzidziso Samuel Kamuriwo and Carolina Billitteri

Entrepreneurship Theory and Practice, 2016, vol. 40, issue 1, 25-48

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.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:40:y:2016:i:1:p:25-48

DOI: 10.1111/etap.12104

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