The financing of innovation: learning and stopping

• 成果类型: Article
• 署名作者: Bergemann, Dirk; Hege, Ulrich
• 署名单位: Yale University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• 发表日期: 2005
• 页码: 719-752
• 关键词: Moral hazard; lending relationships; debt; RENEGOTIATION; credit

摘要

We consider the financing of a research project under uncertainty about the time of completion and the probability of eventual success. We distinguish between two financing modes, namely relationship financing, where the allocation decision of the entrepreneur is observable, and arm's length financing, where it is unobservable. We find that equilibrium funding stops altogether too early relative to the efficient stopping time in both financing modes. The rate at which funding is released becomes tighter over time under relationship financing, and looser under arm's-length financing. The trade off in the choice of financing modes is between lack of commitment with relationship financing and information rents with arm's-length financing.