Goldfain, Ekaterina; Kovac, Eugen - University of Bonn, Germany - 2005
We analyze innovation race in a moral hazard setting. We develop a model in which two competing entrepreneurs work … investments) and alleviate the moral hazard problem if he finances both entrepreneurs. This conclusion is unambiguous, when the … the venture capitalist. The venture capitalist cannot observe the allocation of funds he provides, which creates a moral …