We propose a theory of rational "Rush", emphasizing the quantity of rational over-investment in contrast to the theory of irrational price "Bubble". We illustrate an important friction when financing breakthrough innovations: non-excludability and spillover of uncertain knowledge due to...

This paper aims at providing an overview of the theoretical considerations and a review of the empirical literature on the relationship between finance and growth. Section I describes the role of financial development in economic growth at the macro level, both theoretically and empirically....

The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists...

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the projectś feasibility. Our...

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project’s feasibility. Our...

Employing a large dataset of venture capital investments in US Internet firms, we analyze the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis is associated with a 20% decrease in the average amount of funds raised...

This paper studies how critical entrepreneurial finance outcomes such as the investment return and equity division are shaped by venture characteristics, financier risk preferences and competitive searching. Our analysis uses a double-hazard agency model in which financiers determine the equity...

Empirically, VC-backed startups have higher early growth rates and patenting levels than non-VC-backed ones. Venture capitalists increase a startup's likelihood of reaching the right tails of the firm size and innovation distributions. Furthermore, outcomes are better for startups matched with...