Mechanism Of The Allocation Of Control Right In The Venture Capital

The industry of venture capital plays an important role in the area of technological innovation, employment and economic growth through the process of venture increasement and entrepreneurship development. Because of the uncertainty of venture capital, the design of contract structure, especially the allocation of right control, becomes the core question in the area of venture capital.Based on the literature review, researchers usually emphasize the role of allocation of control right in the area of venture capital, and analyze the effect of capital entrepreneur, quality of project, entrepreneurial net worth and valuation adjustment on the optimal allocation of right control. As a result, emphasize of the thesis is the dynamic mechanism of the allocation of right control in the two-stages. From the perspective of optimal security theory, the thesis analyze the relationship between the value of entrepreneur, entrepreneurial net worth, other characteristics and allocation of right control, value of enterprise. Furthermore, we discuss the characteristics of good contract in venture capital.Study 1 tries to abstract the key factors which influence the allocation of right control in NVC and analyze the way how these factors influence the allocation of right control. Focused on the critical behavioral event, we analyze every financing stage of NVC by longitudinal case study and construct these hypothesizes:the value of entrepreneur and the quality of project have a negative relationship with the control right of risk capitalist, besides, the value of enterprise is influenced by the allocation of control right.Study 2 tries to discuss the factors that influence the allocation of control right in NVC. By the mathematical model and function reasoning, we found that performance of the enterprise, cost of monitoring, the value of enterprise and the characteristics of human capital influence the allocation of right control. Furthermore, performance of the enterprise, the value of enterprise and the specificity of human capital has a negative relationship with the control right of risk capitalist; cost of monitoring and properity of human capital has a positive relationship with the control right of risk capitalist. Besides, risk entrepreneurs will trade off between the control right and cash flow right.Study 2 tries to construct a better financing model. Through the analyze of financing contract structure, we found that a better financing contract structure should consider these factors, including cash flow right, control right redemption right and valutation adjustment, besides, the key of setting a proper performance goal is the development of certain industry. A better financing contract should protect the interests of the entrepreneur and the capitalist, motivate the entrepreneur, and promote the goal development.Based of the results of these studies, we abstracted the main conclusions, and discuss the meaning of the allocation of control right in the area of venture capital. At last, limitations of these researches and the questions for further researches were pointed out.