Entrepreneurship, compensation, and the corporation

Henry Manne has a new paper in the Quarterly Journal of Austrian Economics (Vol. 14, No. 1, p.3–24, Spring 2011) on the above topic. The abstract is given below, note that use of insider trading as a method of compensation and for the encouragement of innovation.

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.