Debt financing plays an important role in the funding of innovative firms, and patents have been increasingly used as collateral. We examine financing of innovative firms when future innovations are not verifiable and hence patenting, which creates a verifiable asset, cannot be contracted upon....

By analyzing production with a continuum of tasks subject to common stochastic effects, the analysis shows that tension between business commonality and standardization is an important source of product cycles. The paper addresses the question of whether business commonality and standardization...

I propose a theory of debt maturity as an incentive device to motivate innovation when contracts are fundamentally incomplete and shaped by ex-post renegotiation. The financing of innovative firms must balance two goals. On the one hand, since innovation is inherently risky, the entrepreneur...

There has been an explosion of innovation backed by venture capital since late 1970's. Nonetheless, a great deal of innovation still occurs within large companies. In this paper, I investigate the factors that determine when innovation is performed by venture-backed firms and when by large...

The decision to cooperate within R&D joint ventures is often based on expert advice such advice typically originates in a due diligence process, which assesses the R&D joint ventures profitability, for example, by appraising the achievability of synergies. We show that if the experts who advise...

This paper develops a theory of the firm scope where not only research but also ordinary production employees can generate inventions. Separating research from production (“specialization”) solves the two-tier agency problem of inducing simultaneously research effort and managerial...

I study how limited information and ex-post evaluation by third parties affect how regulators design approval rules for innovations. I consider a model in which the regulator designs approval rules to minimize criticism for approval errors and for imposing a costly approval process on innovating...

I propose a theory of debt maturity as an incentive device to motivate innovation when contracts are fundamentally incomplete and shaped by ex-post renegotiation. The financing of innovative firms must balance two goals. On the one hand, since innovation is inherently risky, the entrepreneur...

I propose a theory of debt maturity as an incentive device to motivate innovation when contracts are fundamentally incomplete and shaped by ex-post renegotiation. The financing of innovative firms must balance two goals. On the one hand, since innovation is inherently risky, the entrepreneur...

The decision to cooperate within R&D joint ventures is often based on `expert advice.' Such advice typically originates in a due diligence process, which assesses the R&D joint venture's profitability, for example, by appraising the achievability of synergies. We show that if the experts who...