For the sample period of 1965-1992, Kortum and Lerner (2000) find that venture capital (VC) investments have a positive impact on patent count at industry level, and this impact is larger than that of R&D expenditures. We confirm that this positive impact continued to be present and became even...

Entrants are typically found to be more innovative than incumbent firms. Furthermore, these innovative ideas often originate with established firms in the industry. Therefore, the established firm and the start-up firm seem to select different types of projects. We claim that this is the...

Policy makers typically interpret positive relations between venture capital investments and innovations as an evidence that venture capital investments stimulate innovation ('VC-first hypothesis'). This interpretation is, however, one-sided because there may be a reverse causality that...

We study the implication of the standard principal-agent theory developed by Holmstrom and Milgrom (1987) on the endogenous matching of CEO and firm. We show that a CEO with low disutility of effort, low risk aversion, or both should manage a safer firm in the matching equilibrium, and that a...

Any factor that makes acquisition more appealing should increase the number of acquisition that occur. This idea has been captured in standard static models in the literature. However, an increase in the number of acquisitions today means fewer firms exist to perform acquisitions in the future....

Any factor that makes acquisition more appealing should increase the number of acquisition that occur. This idea has been captured in standard static models in the literature. However, an increase in the number of acquisitions today means fewer firms exist to perform acquisitions in the future....

We study the matching problem between firms and CEOs, extending a popular version of the principal-agent model developed by Holmstrom and Milgrom (1987). In their model, the optimal pay-performance sensitivity decreases in firm risks and agent's risk aversion, and increases in agent's...

This paper argues that a large technological innovation may lead to a merger wave by inducing entrepreneurs to seek funds from technologically knowledgeable firms-experts. When a large technological innovation occurs, the ability of non-experts (banks) to discriminate between good and bad...

Why do some start-up firms raise funds from banks and others from venture capitalists? To answer this question, I develop a model of start-up financing when intellectual property rights are not well protected. The upside of VC financing is that the VC understands the business better than a bank....

Evidence suggests that young firm acquisitions have outgrown both IPOs and established firm acquisitions. To study this phenomenon, we develop a dynamic equilibrium model of mergers and acquisitions as efficient reallocation of assets. A firm may build assets that it may not be able to manage...