Henry Manne on Entrepreneurship

28 May 2011 at 4:06 pm Peter G. Klein 1 comment

| Peter Klein |

Important new paper by Henry Manne on entrepreneurship (Quarterly Journal of Austrian Economics, Spring 2011). It won’t surprise you to know that Henry has a solution to the problem of encouraging entrepreneurial behavior among corporate managers: allow them to trade on inside information.

Entrepreneurship, Compensation, and the Corporation
Henry G. Manne

This paper revisits the concept of entrepreneurship, which is frequently neglected in mainstream economics, and discusses the importance of defining and isolating this concept in the context of large, publicly held companies. Compensating for entrepreneurial services in such companies, ex ante or ex post, is problematic — almost by definition — despite the availability of devices such as stock and stock options. It is argued that insider trading can serve as a unique compensation device and encourage a culture of innovation.

Entry filed under: - Klein -, Corporate Governance, Entrepreneurship, Law and Economics, Management Theory, Strategic Management, Theory of the Firm.

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1 Comment Add your own

1. RussCoff | 30 May 2011 at 7:59 am

At the risk of shameless self-promotion, this is very similar to the arguments that Peggy Lee and I made in our SO! piece a number of years ago (“Insider Trading as a Path to Competitive Advantage”). Of course, we were drawing on Manne’s earlier work ;-).

Here’s the link: http://soq.sagepub.com/content/5/1/71.extract