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      How angel know-how shapes ownership sharing in stage-based contracts

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      Author
      Erzurumlu, S. S.
      Joglekar, N.
      Le´vesque, M.
      Tanrısever, Fehmi
      Date
      2019
      Source Title
      Entrepreneurship Theory and Practice
      Print ISSN
      1042-2587
      Electronic ISSN
      1540-6520
      Publisher
      Sage Publications
      Volume
      43
      Issue
      4
      Pages
      773 - 801
      Language
      English
      Type
      Article
      Item Usage Stats
      84
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      117
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      Abstract
      We draw upon stewardship theory to formally derive bounds on the investment amount in a business prospect, and to characterize ownership sharing when investors offer two-stage financing along with know-how to increase the prospect’s valuation. In the early-development stage, we show that the direct effect of investor know-how increases the entrepreneur’s share while the indirect effect from that know-how due to its interaction with the investment size, decreases it. In the subsequent growth stage, the direct effect decreases the entrepreneur’s share while the indirect effect increases it. These tradeoffs offer theoretical and practical implications for writing investment contracts involving investor know-how.
      Keywords
      Stage-based contract
      Investor know-how
      Value creation
      Angel investors
      Stewardship theory
      Empirical analysis
      Mathematical analysis
      Permalink
      http://hdl.handle.net/11693/53417
      Published Version (Please cite this version)
      https://dx.doi.org/10.1177/1042258717744205
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