On The Incentive Structure Of Entrepreneur By Stages

Entrepreneurs are the production of the economic and social development. They are also the core element in the manufacturing process. As the main role of market economy, and the main force of value increase, Entrepreneurs have been by now the most important and scarce resource. How to cultivate the entrepreneurs and intensify their potentials has become the hot problem.Beginning with the historical and logical origin of entrepreneurs, and under the background of modern enterprise system, this thesis gives the relationship between entrepreneurs and the professional managers. The professional managers are the backup of the entrepreneurs. They make money out of their administrative capability. During their managing practice, some high dependence-oriented managers with strong fulfillment motives begin to search the sense of belonging, and choose to become an entrepreneur. But only a small portion can go through the capability-quality-market selecting system, thus gain more and more residual rights of control and claim to residue, and finally become a modern entrepreneur. This model can help the managers to freely choose their career path, and assisting the enterprise in creating proper institutional environment and cultivating the entrepreneurs.The incentive mechanism plays a critical role in this process. The entrepreneurs have different needs, which require distinguished treatment. The incentive structure is much more influential than the total incentive level. This thesis builds dominant incentive structures for the entrepreneurs by stages while covering almost all the needs of the entrepreneur. In the first stage, the professional managers have prosperous material needs, and the enterprise should pay more attention on high salary to show its respect and compensation of the human capital. With the diminishing marginal utility of material incentive and its irreversibility, the material incentive becomes the hygiene factor. Now the managers can be endowed with more residual rights of control and claim to residue, which can perfectly diminish the risk of adverse selection and moral hazard. By this way, it can accelerate the transition of the managers to the entrepreneur. As is known to all, not all the managers can become entrepreneurs, only the risk-oriented, innovative ones, whose entrepreneur abilities have been validated by the capital market, product market and the manager market, can changed to be entrepreneurs. At this stage, the incentive structure should be dominated by reputation, social status and fulfillment incentive.The establishment of this dominant incentive structure of entrepreneurs by stages can help the entrepreneur dominated corporate to institutionalize their incentive system and its transition to a modern enterprise. It also provides a framework for fostering the entrepreneurs.