Public policy and venture capital financed innovation: A contract design approach

Arbeitspapier

The effects of public policy programs which aim at internalizing spill-overs due to successful innovation are analyzed in a sequential double-sided moral hazard doublesided adverse selection framework. The central focus lies in analyzing their impact on contract design. We show that in our framework only ex post grants are a robust instrument for implementing the first-best situation, whereas the success of guarantee programs, ex ante grants and some types of investment grants depends strongly on the characteristics of the project: in certain cases they not only give no further incentives but even destroy contract mechanisms and so worsen the outcome.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2006/29

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Business Taxes and Subsidies including sales and value-added (VAT) ; Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
• Subject: Public Policy ; Contract Design ; Venture Capital ; Moral Hazard ; Asymmetric Information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hirsch, Julia
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/25495
• URN: urn:nbn:de:hebis:30-38039
• Last update: 10.03.2025, 11:45 AM CET