Angels and demons: The negative effect of employees' angel investments on corporate innovation

URL:	https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Document Type:	Working paper
Year of publication:	2021
The title of a journal, publication series:	SSRN Working Paper Series
Place of publication:	Rochester, NY
Publishing house:	SSRN
Publication language:	English
Institution:	Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSB (Business Studies) Business School > ABWL u. Corporate Governance (Niessen-Ruenzi 2012-)
Subject:	330 Economics
Classification:	JEL: G24 , G30 , O30 , O31 , O32,
Keywords (English):	innovation , angel investors , human capital , agency conflicts , distraction
Abstract:	When employees of publicly listed firms personally invest in start-ups, the employer's innovation output decreases. To show this, we link data on angel investors in the US to their employment history. Agency conflicts are the reasons for the negative effect, which is stronger when there are stronger incentives of angel investments. Angel investors divert time and effort from their employer to their personal investments. On the other hand, start-ups benefit if they are financed by angel investors employed at public firms. We highlight a trade-off between the benefits of angel investors for start-ups and the costs for their employer.