TRAINING ENTREPRENEURS IN EMERGING ECONOMIES
How do private equity (included venture capital) investors implement complex financial contracts to monitor and incentivize entrepreneurs in emerging economies? How do entrepreneurs in these economies adopt these sophisticated Western-style governance and inventive practices? Using five in-depth case studies in China from 2002 to 2009, we find that the equity ratchet as a performance-based incentive instrument can be a tool for private equity investors to tame local entrepreneurs in an environment characterized by institutional voids. Instead of as a “coach in professionalizing venture companies in developed economies, private equity investor need play like a “tamer to train entrepreneurs in emerging economies, emphasizing ownerships incentive function as the ex ante mechanism to overcome contractual hazards. Due to the liability of foreignness, in the early stage of private equitys involvement in emerging economies, private equity investors are more likely to set a high performance target, and emphasize the ratcheting up mechanisms to attract local entrepreneurs. In the later stage, however, private equity investors are more likely to set moderate performance targets in exchange for investor protection from the ratcheting down mechanisms. This article enriches entrepreneurship and private equity research by leveraging the institutional-based view framework, brings the liability of foreignness theory in international business into the private equity literature, and further indentifies the different functions of equity ratchets in the different stages of adoption in emerging economies.
Sunny Li Sun Mike W.Peng Hao Liang
Institute for Entrepreneurship and InnovationBloch School of Business and AdministrationUniversity o School of ManagementUniversity of Texas at DallasBox 830688, SM 43Richardson, TX 75083-0688 CentER Graduate School Tilburg University 5000 LE Tilburg The Netherlands
国际会议
北京
英文
1-41
2011-07-01（万方平台首次上网日期，不代表论文的发表时间）