Risk Entrepreneurs To Research, Incentive And Restraint Mechanisms

In the age of knowledge economy, the international competitiveness of a country depends highly on the development of the high and new technological industry. The successful experience of a lot of countries indicates: Venture capital plays a very important role in modern economic development. It has driven the high-tech enterprises from young to mature, from weak to strong by accelerating the conversion of the scientific and technical results into productivity. So the whole economy is becoming more and more prosperous. The important historical function of venture capital has got increasingly wide awareness among people, and was thus called "the engine of economic growth".In China, there is far more heated discussion on venture capital in macroscopic fields than in the microscopic fields for the venture capital company's decision-making. In venture capital, the enterprise develops unsteadily, and the entrepreneur has more information than the venture capitalist because the former controls the key technology and the right for daily management. It's very difficult to monitor the entrepreneur's behavior. So it is necessary for the venture capitalist to take some measures to encourage and restrain the venture entrepreneur.This paper is made up of five chapters. The first chapter expounds the Venture Capital's connotation, characteristic, the difference with other investment forms, and its operation procedure. The second chapter introduces the principal-agent relationship and the incentive-restraint mechanism. There are two principal-agent relations among participators. One is between venture investor and venture organization (venture capitalist), the other is between venture organization (venture capitalist) and venture enterprise (venture entrepreneur). The third chapter explains the incentive mechanism of venture capitalist to venture entrepreneur. Two incentive patterns are mentioned here: currency incentivepattern (share income system, Executive stock option, the combination of balanced scorecard and ESO, the combination of EVA and ESO) and non-currency pattern (spirit incentive). The fourth chapter explains the restraint mechanisms of venture entrepreneur, which include staged investment, the design of financial instrument, and the offer of value-added service etc. The last chapter analyses the situation in venture capital industry of our country, points out the problems in incentive-constraint between venture capitalist and venture entrepreneur, and puts forward suggestions to solve it.