Journal article
The first deal: the division of founder equity in new ventures
- Abstract:
- We examine the trade-off between efficiency and equality within the context of entrepreneurial founding teams. Using a formal theory where founders may have preferences over relative outcomes, we derive predictions about the antecedents and consequences of dividing equity equally among all founders. Using proprietary survey data, we empirically test the predictions. Our central finding is that teams that split equity equally are less likely to raise funds from outside investors. The relationship appears not to be causal, but instead driven by selection effects across heterogeneous teams with varying degrees of inequality aversion.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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Access Document
- Files:
-
-
(Preview, Supplementary materials, Accepted manuscript, pdf, 121.0KB, Terms of use)
-
(Preview, Accepted manuscript, pdf, 902.3KB, Terms of use)
-
- Publisher copy:
- 10.1287/mnsc.2016.2474
Authors
- Publisher:
- INFORMS (Institute for Operations Research and Management Sciences)
- Journal:
- Management Science More from this journal
- Volume:
- 63
- Issue:
- 8
- Pages:
- 2647-2666
- Publication date:
- 2016-05-23
- Acceptance date:
- 2016-01-19
- DOI:
- EISSN:
-
1526-5501
- ISSN:
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0025-1909
- Language:
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English
- Pubs id:
-
pubs:599051
- UUID:
-
uuid:5936adba-eddc-4d18-b0ab-9a9b908fe600
- Local pid:
-
pubs:599051
- Source identifiers:
-
599051
- Deposit date:
-
2016-02-04
- ARK identifier:
Terms of use
- Copyright holder:
- INFORMS
- Copyright date:
- 2016
- Rights statement:
- Copyright © 2016, INFORMS
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from INFORMS at https://doi.org/10.1287/mnsc.2016.2474
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