between business formation and medium run growth. An investment externality is identified that results in underaccumulation of … capital in the decentralized market equilibrium and, thus, creates an investment multiplier. Some form of investment promotion … is called for. The paper compares the effectiveness of policies to promote business formation with a general investment …

shareholders and managers in which managers have private benefits or private costs of investment. Managers overinvest when they … compensation, investment, and firm performance for both cases. The relationship between firm performance and managerial incentives …, in isolation, is insufficient to identify whether managers have private benefits or private costs of investment. In order …