Dynamics of Innovation and Risk

• 成果类型: Article
• 署名作者: Biais, Bruno; Rochet, Jean-Charles; Woolley, Paul
• 署名单位: University of Zurich; Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; University of London; London School Economics & Political Science
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv003
• 发表日期: 2015
• 页码: 1353
• 关键词: Moral hazard; INVESTMENT

摘要

We study the dynamics of an innovative industry in which agents learn about the likelihood of negative shocks. Managers can exert risk prevention effort to mitigate the consequences of shocks. If no shock occurs, confidence improves, attracting managers to the innovative sector. But, when confidence becomes high, inefficient managers exerting low risk-prevention effort also enter. This stimulates growth, while reducing risk prevention. The longer the boom, the larger the losses if a shock occurs. Although these dynamics arise in the first-best, asymmetric information generates excessive entry of inefficient managers, earning informational rents, inflating the innovative sector, and increasing its vulnerability.