This paper develops a theory why innovation often takes place in new firms that depend overproportionally on external finance usually supplied by specialist intermediaries called venture capitalists. It is argued that innovative projects are characterized by two features: uncertainty that is...

We consider a regulator who does not know how many firms should be granted a license to enter a market as he has limited information on their setup costs. We propose two auction formats which implement the efficient market structure. In a "jumping English auction" the price for a license...

Prices may di er between regional markets if transport capacities are limited. We develop a new approach to determine to which extent such di erences stem from limited participation in cross-border trader rather than from bottlenecks. We derive a theoretical integration benchmark for the typical...

When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the...

We explore why venture capital funds limit the amount of capital they raise and do not reinvest the proceeds. This structure is puzzling because it leads to a succession of several funds financing each new venture which multiplies the well known agency problems. We argue that an inside investor...

Der Aufsatz gibt zunächst einen kurzen Überblick über die Entwicklung des Marktes für Wagniskapital in den USA und in Deutschland. Dann wird gezeigt, mit welchen besonderen Anreiz- und Vertragsproblemen die Finanzierung von Innovationen zu kämpfen hat und welche neuen Instrumente von der...

We study an exchange economy in which investors are loss averse over relative consumption, that is, they suffer a utility loss if they consume less than members of their reference group. As a consequence there is an incentive to hold the same portfolio of risky assets as the reference group....

We explore why venture capital funds limit the amount of capital they raise and do not reinvest the proceeds. This structure is puzzling because it leads to a succession of several funds financing each new venture, which multiplies the well-known agency problems. We argue that an inside investor...