Venture capitalists not only finance but also advise and thereby add value to young innovative firms. The prospects of venture capital backed firms thus depend on joint efforts of entrepreneurs and informed venture capitalists, and are subject to double moral hazard. In financing a portfolio of...

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment...

We demonstrate how endogenous information acquisition in venture capital markets creates investment cycles when competing financiers undertake their screening decisions in an uncoordinated way, thereby highlighting the role of intertemporal screening externalities induced by competition among...

This paper discusses the role of public policy towards the venture capital industry. The model emphasizes four margins: supply of entrepreneurs due to career choice, entry of venture capital funds and search for investment opportunities, entrepreneurial effort and venture capital advice during...

This paper proposes and analyses a model of start-up investment. Innovative entrepreneurs are commercially inexperienced and can benefit from venture capital support. Only part of them succeed in matching with a venture capitalist while the rest must resort to standard bank finance. We consider...

In this paper we set up a model of start-up finance under double moral hazard. Entrepreneurs lack own resources and business experience to develop their ideas. Venture capitalists can provide start-up finance and commercial support. The effort put forth by either agent contributes to the firm s...

The paper proposes a simple equilibrium model of venture capital, entrepreneurship and innovation. Venture capitalists not only finance but also advise start-up entrepreneurs and thereby add value to new firms. The paper demonstrates how a productive and active VC industry boosts innovation...

A model of start-up finance with double moral hazard is proposed. Entrepreneurs have ideas but lack own resources as well as commercial experience. Venture capitalists provide start-up finance and managerial support. Both types of agents thus jointly contribute to the firm s success, but neither...

We study a model of network formation and start-up financing with endogenous entrepreneurial type distribution. A hub firm admits members to its network based on signals about entrepreneurs' types. Network membership is observable, which allows lenders to offer different interest rates to...

Start-up entrepreneurs are often commercially inexperienced. In giving managerial advice, venture capitalists can importantly enhance the success of innovative but highly risky ventures. The supply of experienced venture capitalists is not easily increased, however. When the rate of business...