Financing and product market competition: Optimal contracts with venture capitalists

Arbeitspapier

We consider the provision of venture capital in a dynamic agency model. In particular, we focus on the interaction between venture capital financing and product market competition: A young firm with a risky innovation project attempts to enter a market where it faces two periods of price competition with an incumbent firm. Since the young firm is wealth-constrained, it seeks equity financing from a venture capital company. The allocation of funds and learning about the project's quality are both subject to moral hazard. We analyze the provision of capital under (i) short-term and (ii) long-term contracting, and compare the results.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tübinger Diskussionsbeiträge ; No. 162

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Oligopoly and Other Imperfect Markets ; Innovation and Invention: Processes and Incentives
• Subject: Venture Capital ; Dynamic Financial Contract ; Moral Hazard and Learning ; Innovation and Market Entry ; Strategic Competition ; Finanzierungstheorie ; Risikokapital ; Vertragstheorie ; Markteintritt ; Wettbewerb ; Innovation ; Moral Hazard ; Lernprozess ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Neff, Cornelia
• Event: Veröffentlichung
• (who): Eberhard Karls Universität Tübingen, Wirtschaftswissenschaftliche Fakultät
• (where): Tübingen
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/47575
• URN: urn:nbn:de:bsz:21-opus-21175
• Last update: 10.03.2025, 11:41 AM CET