The Investgation Of An Entrepreneur's Choice Towards Different Kinds Of Investors In Continuous Time Principal-agent Models

Entrepreneurial activities have injected persistent vitality into economic development,but the bottleneck of shortage of capital seriously hinders the development of start-up enterprises.In order to solve the financing problem,the entrepreneur's choice of financing objects has become the focus of venture capital research.The moral hazard caused by the information asymmetry between entrepreneurs and investors brings down the efficiency of R&D.Therefore it is important to design an effective incentive mechanism to improve the R&D efficiency.In order to describe the dynamic process of R&D projects,this thesis designs the incentive mechanism of venture capital in the continuous-time principal-agent model.Some scholars state that the reputation of cooperative projects is affected by the efforts of both entrepreneurs and investors and changes with time,and this process can be described by differential equation.Meanwhile,the output of R&D projects is affected by the reputation and the efforts of both parties.This thesis focuses on the choice of the entrepreneur between two important sources of funding?the angel investor and the venture capitalist.By constructing a continuous time incentive model of venture capital with dynamic reputation,the optimal incentive contracts under the case where the entrepreneur cooperates with two kinds of investors are obtained respectively,and we analyze the influences of different factors on the entrepreneur's choice towards investors,such as the behavior and the economic factors,the performance of the corporate social responsibility and outsourcing project.Specifically,we have done the following three aspects:(1)Based on the real venture capital activities,this thesis breaks through the traditional assumption of complete rational economic participant,and takes the limited rationality into consideration,and assumes that there exists emotional relationship between the angel investor and the entrepreneur,the venture capitalist has stronger project value-added ability than the angel investor and his effort has complementary effects with the effort of the entrepreneur.By constructing a continuous time principal-agent model with dynamic reputation in chapter 2 and using the dynamic programming method,we obtain the optimal incentive contracts when the entrepreneur cooperates with the angel investor and the venture capitalist respectively.By calculating and deducing,we discuss the influences of different factors on the optimal incentive contract,such as emotional factors,then analyze and verify the conclusions by numerical simulation.To a certain extent,the emotional factors between the angel investor and the entrepreneur reduce the moral hazard and increase the efforts of both sides.Since the complementary effect of the efforts between the venture capitalist and the entrepreneur improves the marginal productivity of the effort,the amounts of effort of both sides increase.The return of the angel investor is positively related to the emotional factors,and the return of the venture capitalist is positively related to the complementary effect coefficient.When the emotional relationship is weak,the entrepreneur pays more attention to the investor's ability of value creation,the venture capitalist would be the better option,but when the emotional relationship is strong,the entrepreneur pays more attention to the empathy of angel investor,the angel investor would be the better option.(2)Introducing the corporate social responsibility regarded as an independent investment into the model of chapter 2,we study the problem of financing object choice when the entrepreneur should carry out their social responsibility.Assuming that the investor who is regarded as the primary principal,signs the explicit contract with the entrepreneur to manage the R&D project,and the government who is regarded as the secondary principal,signs the implicit contract with the entrepreneur to fulfill the social responsibility,we obtain the optimal incentive contract when the entrepreneur cooperates with the angel investor and the venture capitalist respectively by constructing the continuous-time primary and secondary principal-agent model with dynamic reputation.Through numerical simulation and comparative analysis,we discuss the impacts of corporate social responsibility and other factors on the optimal incentive contracts.As the manager of society,the government pursues the maximization of the total social welfare.Whether the entrepreneur chooses to cooperate with the angel investor or the venture capitalist,the government will make its best effort to guide the entrepreneur to fulfill his social responsibilities actively,and will design an incentive mechanism to enable the entrepreneur to make the best effort to undertake his social responsibilities.In the case where the entrepreneur cooperates with the angel investor,as the external effect of fulfilling social responsibility on R&D output increases,the effort of the entrepreneur provided for the R&D project increases,and the income of the angel investor also increases.In the case where the entrepreneur chooses the venture capitalist to cooperate with,as the external effect of carrying out social responsibility on R&D output increases,both the entrepreneur and the venture capitalist will exert more efforts on the R&D project,and the income of the venture capitalist will increase.At the same time,the emotional factor threshold,which makes the returns of both the angel investor and the venture capitalist equal,will decrease with the increase of the external effect.(3)On the basis of chapter 2,we consider the strategies of the entrepreneur's financing objects when a part of the project is subcontracted to scientific research institution.By constructing the principal-agent-subagent model under the continuous-time settings,we obtain the optimal incentive contracts when the entrepreneur cooperates with the angel investor and the venture capitalist respectively.Through numerical simulation and comparative analysis,we discuss the influences of project outsourcing and other factors on the optimal contracts.No matter who the entrepreneur chooses to cooperate with,as the transformation rate of outsourcing project increases,the investors will give more proportion of the incentive compensation to the entrepreneur,and the entrepreneur will also provide more proportion of the incentive compensation for the scientific research institution.In the case where the entrepreneur cooperates with the angel investor,because of the emergence of the scientific research institution,the incentive reward which is given by the angel investor to the entrepreneur,decreases with the increase of emotional factors.As the transformation rate of outsourcing project improves,the entrepreneur will exert more efforts on the R&D project,and the income of the angel investor will increase.In the case where the entrepreneur chooses the venture capitalist,as the transformation rate of outsourcing project improves,both the entrepreneur and the venture capitalist will provide more efforts for the R&D project,and the income of the venture capitalist will also increase.In addition,the emotional factor threshold which makes the returns of the angel investor and the venture capitalist equal decreases with the increase of transformation rate.