Strategic versus Financial Investors: The Role of Strategic Objectives in Financial Contracting

Stefan Arping and Sonia Falconieri
Additional contact information
Sonia Falconieri: Brunel University

No 09-036/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Strategic investors, such as corporate venture capitalists, engage in the financing of start-up firms to complement their core businesses and to facilitate the internalization of externalities. We argue that while strategic objectives make it more worthwhile for an investor to elicit high entrepreneurial effort, they can also undermine his commitment to penalize poorly performing entrepreneurs by terminating their projects. Based on this tradeoff we develop a theory of financing choice between strategic and financial investors. Our framework provides insights into the design of corporate venturing deals and the choice between corporate venturing and independent venture capital finance.

Keywords: Corporate Venturing; Soft Budget Constraint (search for similar items in EconPapers)
JEL-codes: G2 G3 L1 (search for similar items in EconPapers)
Date: 0000-00-00, Revised 2009-04-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Strategic versus financial investors: the role of strategic objectives in financial contracting (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20090036

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