To read this content please select one of the options below:

Venture investment under multi-stage incentive model based on fairness concerns

Yadong Shu (Institute for Logistics and Emergency Management, College of Economics and Management, Southwest Jiaotong University, Chengdu, China) (College of Mathematics and Statistics, Guizhou University of Finance and Economics, Guiyang, China)
Ying Dai (Institute for Logistics and Emergency Management, College of Economics and Management, Southwest Jiaotong University, Chengdu, China)
Zujun Ma (Institute for Logistics and Emergency Management, College of Economics and Management, Southwest Jiaotong University, Chengdu, China)
Zhijun Hu (College of Mathematics and Statistics, Guizhou University, Guiyang, China)

Kybernetes

ISSN: 0368-492X

Article publication date: 13 December 2021

Issue publication date: 17 January 2023

81

Abstract

Purpose

This study explores the impact of EN's (venture entrepreneurs, simplified as EN) jealousy fairness concerns coefficient on two-stage venture capital decision-making in cases of symmetrical and asymmetrical information. It discusses the equilibrium solution of two-stage venture.

Design/methodology/approach

The principal-agent model was established based on multiple periods, and differentiated contracts were established at different stages. The validity of the models and the contract was verified by numerical simulation.

Findings

The results suggest that with the increase in the EN fairness concerns coefficient, the effort level of EN decreases continuously and decreases faster in the second stage because this is the last stage. The level of VC's (venture capitalist, simplified as VC) effort declines first and then increases; that is, VC will increase the effort level when the fairness concerns coefficient increases to a certain threshold. To motivate EN to pay more effort, VC will increase the incentive to EN in the first stage. However, it will reduce the level of incentive to EN in the second stage. In the limited stage of venture investment, consider that the fairness concerns of EN do not make the profits of EN and VC achieve Pareto improvement simultaneously.

Originality/value

First, the authors implanted fairness concerns into multi-stage venture capital and discussed the impact of fairness concerns on the efforts and returns of both parties. Second, among the influencing factors of the project output, the authors consider the bilateral efforts of EN and VC, the working capacity of EN, the initial investment scale, and the external uncertain environment.

Keywords

Acknowledgements

The work was supported by the National Natural Science Foundation of China (Nos. 71103149, 61472093, 71761005, and 71361003), Humanities and Social Sciences Foundation of Ministry of Education of China (No.16YJA630005); Major Project of Philosophy and Social Science Research of Sichuan Province(No. SC17A030); Soft Science Research Project of Chengdu City (No.2016-RK00-00266-ZF); Academic Project of Guizhou University of Finance and Economics (No. [2017]5736-024).

Citation

Shu, Y., Dai, Y., Ma, Z. and Hu, Z. (2023), "Venture investment under multi-stage incentive model based on fairness concerns", Kybernetes, Vol. 52 No. 1, pp. 344-361. https://doi.org/10.1108/K-06-2021-0447

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

Related articles