The complementarity effect: Effort and sharing in the entrepreneur and venture capital contract

摘要: Abstract This paper focuses on the relationship between venture capitalist and entrepreneur. In particular, it analyses how both players’ unobservable effort levels affect equity share that entrepreneur is willing to cede capitalist. We solve entrepreneur’s maximization problem in presence of double-sided moral hazard. this scenario, we show capitalist’s binding and, therefore, there no efficiency wage. simulate model does not monotonically decrease allocated capital, while increase his share. as efforts tend be more complementary, project cash flows are distributed nearly equally, at approximately 50% for each partner. theoretical finding actually observed real contracts entrepreneurs capitalists.