Research on Interpreting Startup Incentives Mechanism and Adjusting Risk Preferences for Investors: A Behavioral Contract Theory Perspective

Abstract

In the context of the prevailing entrepreneurial boom, how startups can attract investors and adjust their risk preferences through effective incentive mechanism design has become a key issue affecting the success or failure of financing. Based on the perspective of behavioral contract theory, this paper examines the impact of incentive mechanism design on investors’ decision-making and risk preferences in startups. By classifying incentive mechanisms into formal terms and informal psychological contracts, this paper analyzes the path mechanism of its signaling to influence investors' cognition and behavior. Through the path of ‘incentive-cognition-behavioral adjustment’, it reveals how incentives affect investors' psychological expectations and risk perception, and through the comparative analysis of WeWork and Xiaomi, it is found that effective incentives require the synergy of formal terms and informal psychological contracts. This paper provides theoretical support and practical insights into the incentive mechanisms of startups and investors' assessment of investment project risks.