When rivals originate from within

This paper examines two questions that affect entrepreneurial activity. First, under what conditions are new opportunities exploited by managers rather than their employer firms and second, under what conditions do the employer firms have sufficient incentive to pay off managers to deter entrepreneurial activity? The paper develops and analyzes an economic model to examine the condition sets. Results are consistent with recent findings in the empirical literature on managerial salaries and on technology adoption in oligopolistic industries.