Schroth, Enrique; Szalay, Dezsö - In: Review of Finance 14 (2010) 1, pp. 73-118
This paper studies the impact of financing constraints in patent races. We develop a model of optimal contracting where firms finance their R&D expenditures with an investor who cannot verify their effort. In equilibrium, firms are more likely to win the more cash and assets they hold prior to...