Credit constraints are more frequent among growth companies with large investment opportunities. For the same reason, profit taxes may harm innovative firms more than standard ones. This paper develops a model of heterogeneous firms where an endogenous share opts for innovation and faces credit...

This Paper discusses the role of public policy towards the venture capital industry. The model emphasises four margins: supply of entrepreneurs due to career choice, entry of venture capital funds and search for investment opportunities, simultaneous entrepreneurial effort and managerial advice...

Venture capitalists provide risk capital and valuable monitoring services that are essential for the success of upstart companies. The financial sector’s expertise in monitoring investment proposals may increase with the accumulated experience in funding such projects. In the other direction,...