Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1019882 | Journal of Business Venturing | 2006 | 24 Pages |
Many professional service organizations have adopted a little understood contractual form: service-for-equity. Based on in-depth case studies of 12 major professional service providers with a combined experience of 179 equity-for-service deals, this paper documents 18 intended and unintended consequences, emanating from and expanding beyond agency theory, of adopting such a contractual form. Six propositions are developed which speculate how these consequences, categorized under client development, service operations, financial management, and organizational behaviour, affect long run performance. Assuming these propositions cannot be rejected through empirical analysis, the paper also provides managerial guidance for effective implementation of equity-for-service arrangements.