Skip to main content

Raising the Returns to Venture Finance

Baden-Fuller, Charles, Dean, Alison, McNamara, Peter, Hilliard, Bill (2006) Raising the Returns to Venture Finance. Journal of Business Venturing, 21 (3). pp. 265-285. ISSN 0883-9026. (doi:10.1016/j.jbusvent.2005.02.009) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:9141)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
https://doi.org/10.1016/j.jbusvent.2005.02.009

Abstract

Investors in ventures that threaten to disrupt the markets of incumbents can use the options markets to add value to their investments by purchasing put options on the stock of the disrupted rivals on the basis of their asymmetric knowledge. By making a profit on these derivative trades in

the stock of the disrupted firms, the investor innovator is able to recapture from the market extra and immediate profits (equivalent to the value of the consumer surplus) generated by the innovation. These additional profits increase the incentive of investors to invest in disruptive ventures and so correct biases that have been observed against investing disruptive innovation. Our paper provides guidance as to how these effects arise and their value. It also explores the ethical, regulatory and

practical constraints on undertaking the trades, pointing out that it is effective and the legality seems to be robust provided certain conditions are met.

Item Type: Article
DOI/Identification number: 10.1016/j.jbusvent.2005.02.009
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Alison Dean
Date Deposited: 02 Sep 2008 12:20 UTC
Last Modified: 16 Nov 2021 09:47 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/9141 (The current URI for this page, for reference purposes)

University of Kent Author Information

  • Depositors only (login required):

Total unique views for this document in KAR since July 2020. For more details click on the image.