neoclassical and marxian conceptions of production incorporating information deficiencies into the neoclassical paradigm has introduced some broad similarities with the marxian analysis of the labor process both approaches predict the existence of a variety of contractual regimes and that workers with equal productivities can be adjudged unequal in the market place and while the marxian approach sees unemployment as inevitable the new neoclassical models also allow for equilibrium unemployment these similarities and areas of divergence in the assessment of productive efficiency and welfare are explored a crucial difference arises from the individualism of the neoclassical model as opposed to the class approach in the marxian model copyright 1988 by oxford university press

licensing of university inventions the role of a technology transfer office abstract we develop a theoretical model to explain the specific role of technology transfer offices ttos in licensing university inventions using a framework where firms have incomplete information on the quality of inventions we develop a reputation argument for the tto to reduce the asymmetric information problem our results indicate that a tto is often able to benefit from its capacity to pool innovations across research units and to build a reputation within universities we identify when the technology seller will have an incentive to shelve some of the projects thus raising the buyer s beliefs on expected quality this results in fewer but more valuable innovations being sold at higher prices we explain the importance of a critical size for the tto to be successful as well as the stylized fact that ttos may lead to fewer licensing agreements but higher income from innovation transfers

prices and qualities a search model recently there has been substantial interest in the study of price and or quality dispersion in markets with costly information many of these studies focus on the problem of price dispersion assuming that the quality is fixed i e homogeneous good the most distinct feature of these models is the way information is gathered information can either be obtained through the purchase of a newspaper at some cost information purchase models or through costly sequential or nonsequential search search models each of these models identifies the conditions under which a rational expectation price dispersion equilibrium will exist in particular using an information purchase model with two classes of consumers with differential information costs salop stiglitz 15 show that equilibrium may be characterized by a high and a low price for a homogeneous good on the other hand wildeschwartz 18 show that there can be price dispersion if consumers have different propensities to search they assume that one class of consumers will shop only once and the other class will shop an exogenously determined number of times before purchasing in their model only certain price distributions are sustainable in equilibrium the salop stiglitz and wilde schwartz results are due to the ex ante heterogeneity of consumer types in an interesting paper burdett judd 3 have established that price dispersion can exist even when consumers are identical due to ex post heterogeneity in information while the price dispersion models are illuminating in explaining the differential prices in the markets they are limited by their abstraction from the quality uncertainty goods of heterogeneous qualities can be and are offered in a recent paper 6 using an information purchase model with two classes of consumers we have analyzed the price and quality equilibria by examining three different environments involving costly information i quality information costly price information costless ii price information costly

the relationship of wages to the value of labour power in marx s labour market having explicitly rejected malthus law of population marx asserted in his early writings that it was competition that would keep wages fluctuating the value of labor power even though he did not consider the production of labor power to be a capitalist process this paper notes the inconsistency in this approach and then proposes that implicit in marx s mature works there is a consistent mechanism through which wages gravitate toward the value of labor power this uses both the flexible historical and moral element of the value of labor power and the reserve army hypothesis this combination explains why wages follow a relatively even path over time a model of the labor market is developed which appears to be consistent with marx s mature writing copyright 1991 by oxford university press

prices and qualities in markets with costly information this paper extends the seminal work of akerlof and salop and stiglitz in two directions i the sellers can select both the selling prices and quality levels of their good and ii the buyers can acquire price quality information about individual sellers at a cost we observe multiple price quality combinations in equilibrium which depend upon the distribution of information costs of consumers and upon whether quality or price or both are costly observable welfare comparisons of equilibrium are considered we show that welfare will be greater when price advertising is permitted

selection of entrepreneurs in the venture capital industry an asymptotic analysis we study a model of entrepreneurs who compete in an auction like setting for venture capital vc funding in a setting where limited capital dictates that the vc can only finance the best entrepreneurs with asymmetric information vcs can only assess entrepreneurs by the progress of development which in equilibrium reveals the quality of the new technology using an asymptotic analysis we prove that in attractive industries having a large number of entrepreneurs competing for vc funding could lead to underinvestment in technology by entrepreneurs as the effort exerted by losing entrepreneurs is wasted the study then proceeds to characterize the conditions under which a greater number of competing entrepreneurs is better the model also demonstrates that vcs could possibly increase their payoff by concentrating on a single industry in addition the study also provides some insights on the effects of multiple investments by vcs and the effects of competition among vcs on the same investments

costly monitoring financial intermediation and equilibrium credit rationing abstract this paper establishes a link between equilibrium credit rationing and financial intermediation in a model with asymmetrically informed lenders and borrowers costly monitoring and investment project indivisibilities intermediation is shown to dominate borrowing and lending between individuals and these financial intermediaries exhibit several of the important features of intermediaries as we know them equilibrium interest rates and the aggregate quantity of loans respond quite differently to changes in taste and technology parameters depending on whether or not there is rationing in equilibrium

limited attention and the role of the venture capitalist abstract this research analyzes the venture capitalist s incentives to maximize the profits of the entrepreneurs of ventures and the limited partners of a venture fund venture capital is a professionally managed pool of capital invested in equity linked private ventures entrepreneurs turn to venture capitalists for financing because high technology startup firms have low or negative cash flows which prevent them from borrowing or issuing equity in addition venture capitalists are actively involved in management of the venture to assure its success this solves the problem of startup firms that do not have the cash flows to hire management consultants venture capital contracts have three main characteristics 1 staging the commitment of capital and preserving the option to abandon 2 using compensation systems directly linked to value creation and 3 preserving ways to force management to distribute investment proceeds these characteristics address three fundamental problems 1 sorting the venture capital among the entrepreneurial ventures 2 providing incentives to motivate venture capitalists to maximize the value of the funded ventures and 3 providing incentives to motivate entrepreneurs to maximize the value of the ventures venture capitalists fund only about a dozen projects a year out of a thousand evaluated each project may receive several rounds of financing payoffs to vcs can be very high or be a complete loss the typical venture capital vc firm is organized as a limited partnership with the venture capitalists serving as general partners and the investors as limited partners general partner vcs act as agents for the limited partners in investing their funds vcs invest their human capital by placing their reputation on the line the goal is to begin to convert the investment into cash or marketable securities which are distributed to the partners vc management companies receive a management fee equal to a percentage usually 2 5 of the capital of each fund they also receive a percentage 15 30 of the profits of each fund called carried interest periodic reports are made by the vc firm to the limited partners usually these are only costs of managing the fund and so revenues are negative most contracts specify the percentage of time that the vc will devote to managing the fund the analysis of this research deals with the incentives of the vc who has limited attention to be allocated between improving current ventures and evaluating new ventures for possible funding the analysis shows that the vc as agent for both the entrepreneur and the general partners does not have the incentives required to maximize their profits the vc allocates attention among ventures and venture funds less frequently than required to maximize the entrepreneurs and limited partners profits however the vc does maximize the total profits of all ventures because the vc considers the opportunity cost of attention the vc s allocation of attention is efficient the implication of this result is that although the entrepreneurs and limited partners could be made better off with a different allocation of the vc s time this would be an inefficient use of the vc s time

a multi period game theoretic model of venture capitalists and entrepreneurs abstract this study examines the relationship between a venture capitalist and an entrepreneur and follows it from its inception to the exit stage the model we use is a multi period game theoretic model with moral hazard where the contract is set in the first period the contribution of the study lies in the insights it provides on optimal contracts and its characterization of an endogenous exit point specifically the paper shows that the optimal incentive scheme should backload all incentive payments to the entrepreneur as much as possible consequently a straight debt contract would be optimal in venture financing

the contingent nature of the revolution predicted by marx abstract a formalisation of elster s interpretation of marx s theory of revolution is presented in terms of a one sector model with continuous substitution land as a factor of production and a particular population theory a justification for calling such a model marxian is given then it is shown that the revolution may occur only if the drag caused by the fixed supply of land is greater than the force of technical progress

multimodality and mixture distributions an application to a survey of economic expectations in this article we present the silverman multimodality test and mixture distributions methodology applying both approaches to the survey of economic expectations of the central bank of chile the main results reflect the importance of a permanent monitoring of the complete distributions and not just central tendency meausures as is the practice in many central banks currently we find that the forecasts of the private professional forecasters have systematically been in line with the inflation targeting range although during episodes where the effective inflation proved to be outside the target range

bond covenants and delegated monitoring this paper examines alternative contracting arrangements available to a firm seeking to finance an investment project the authors consider the choice between loan contracts with covenants based on noisy indicators of the firm s financial health and loan contracts enforced by a monitoring specialist in one interpretation the specialist is a financial intermediary the firm s choice is shown to depend upon the firm s credit rating the accuracy of financial indicators of the firm s condition the loss from premature liquidation of the firm s project and the cost of monitoring

on growth drivers of high tech start ups exploring the role of founders human capital and venture capital abstract in this paper we jointly analyze the effects of the human capital of founders and access to venture capital vc financing on the growth of 439 italian new technology based firms ntbfs we rely on econometric models that control for survivorship bias and the endogeneity of vc financing as to non vc backed firms the competence based argument that the capabilities of ntbfs coincide with founders skills is confirmed nonetheless once a ntbf obtains vc this coincidence vanishes pointing to the coach function performed by vc investors conversely the view that sees the scout function as the main task performed by vc investors is not supported

contracting signaling and moral hazard a model of entrepreneurs angels and venture capitalists abstract investment by wealthy individuals known as angels in startup firms is quite significant and has taken off in the last few years angels invest in the company at an earlier stage than venture capitalists vcs do this paper examines the relationship between an entrepreneur an angel and a vc from the seed investment made by the angel to the exit stage the study characterizes the equilibrium contracts among the players and provides insights into the related institutional arrangements next the study examines the signaling aspects of the game the paper also analyzes the moral hazard problems of the entrepreneur and the vc it shows that the outcome in a startup firm is not efficient because of the free rider phenomenon

moral hazard and information sharing a model of financial information gathering agencies we propose a theory of information gathering agencies in a world of informational asymmetries and moral hazard in a setting in which true firm values are certified by screening agents whose payoffs depend on noisy ex post monitors of information quality the formation of information gathering agencies groups of screening agents is justified on two grounds first it enables screening agents to diversify their risky payoffs second it allows information sharing the first effect itself is insufficient despite the risk aversion of screening agents and the stochastic independence of the monitors used to compensate them this paper develops a model that explains the formation of financial institutions which acquire and process information for the purpose of certifying asset qualities but do not get involved in funding the model makes two basic assumptions the first is that there is an informational asymmetry in the capital market involving insiders possessing more accurate information about the true economic values of their firms than outsiders and the second is that those engaged in the production of information to rectify this asymmetry can gain from sharing their information examples of the information gathering agencies iga s we study are creditrating agencies financial newsletters standard and poor s value line investment counselors credit bureaus etc iga s are distinct from funding financial intermediaries ffi s like banks and credit unions that in addition to acquiring and processing information also issue claims against themselves fund their customers needs and transform asset characteristics from a modeling standpoint a key distinction between iga s and ffi s is that in the case of the latter outsiders depositors for instance do not necessarily have to assess the quality of the intermediary s information since the intermediary can be made accountable for this quality through the positions it takes in the screened assets thus models that explain ffi s focus on how the contracts offered by the intermediary ensure information reliability without reliance on explicit monitoring on the other hand because of the absence of loan and deposit type contracts to dissipate informational problems a model explaining iga s must rely on monitoring related mechanisms

fast growing small entrepreneurial firms and their venture capital backers an applied principal agent analysis first the empirical background of the u k venture capital industry is developed using a panel of major u k venture capital funds over the period 1988 92 then a framework for applied principal agent analysis is developed focusing on risk management and information under risk management it explores attitude to risk risk sharing and bearing and the effects of risk bearing on effort under information handling it explores information systems information asymmetries between investor venture capitalist and investee entrepreneur and ways of attenuating them and information variance and costs finally the contract between investor and investee is seen as a device for trading risk and information the implications of this trading for risk bearing effort and efficiency are explored the whole analysis is supported by a detailed case study which reflects current practice in the u k venture capital industry the evidence provides striking confirmation of the applicability of the principal agent model to the venture capital financing of hightech ventures

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

specialization versus diversification as a venture capital investment strategy abstract much important work has informed us of rates of return earned by venture capitalists the importance of venture capitalists to the going public process and the criteria venture capitalists use to evaluate deals this paper seeks to add to the literature by testing hypotheses based upon both the finance and strategic management literature regarding certain venture capitalist investment practices venture capitalists seek to control or manage risk driscoll 1974 macmillan siegel and subbanarasimha 1985 financing structure and investment strategy provide several means for venture capitalists to do this tools available to the venture capitalist include portfolio diversification to spread risk across different industries firms or hot cold ipo markets to minimize unsystematic or investment specific risk information sharing networking and specialization can also be used to control unsystematic risk several hypotheses are developed from these conflicting perspectives data used to test the hypotheses are derived from responses to a survey of venture capitalists three hundred surveys were mailed to venture capitalists 98 or 32 7 returned usable responses portfolio diversification is a well known means to control risk exposure by reducing unsystematic or specific risks however bygrave 1987 1988 as well as financial intermediation theorists argues that maintaining a high degree of specialization is useful for controlling risk as well as for gaining access to networks information and deal flow from other venture investors the analyses of this paper build upon bygrave s work we construct more rigorous tests to resolve the conflict between the diversification and information sharing hypotheses our hypothesis tests were usually resolved in favor of the information sharing view for example venture capitalists in the sample that were heavily involved in seed round financing were diversified across fewer numbers of firms and industries further evidence in favor of information sharing is seen in investment patterns across different financing stages diversification would imply maintaining a portfolio of investments across the different investment stages the information sharing specialization view would argue that it is best to stay focused on a single stage or several connected stages the empirical evidence from the sample once again favors the specialization perspective this research provides information of use to venture capitalists as they seek information on how best to control risk to entrepreneurs as they learn of the factors venture capitalists consider in determining their investment strategy and to academicians as such studies provide insight to general industry practice and thus help to form the basis of classroom discussion and future research endeavors

venture capital growing pains should the market diet abstract this paper examines recent trends in the venture capital market and current research that explores the impact of these trends high returns in the venture capital industry caused by the surging market for venture backed initial public offerings and recent reductions in the capital gains tax rate have led to dramatic increases in venture capital commitments this rise in fundraising has had dramatic effects on various segments of the venture capital market which may indicate overheating the terms and conditions of venture capital limited partnerships have changed reflecting the growth in demand for venture capital services the share of profits retained by venture capitalists has increased while the restrictiveness of the partnership agreements has eased venture firms are raising substantially larger funds with increasing pressure to find investments thereby moving to later stage investments the price of investments has also responded to the growing desire to increase investment finally institutional investors are increasingly looking internationally for new investment opportunities in venture capital to avoid potential market excesses

factors that determine the reputation of private equity managers in developing markets abstract this paper analyzes the relationship between investors and private equity managers in order to identify the factors that affect the latter s reputation since there are no individual references about their past returns in developing private equity markets the reputation of such players is thought to be linked to their capacity for obtaining new funds results provide evidence of the volume of investments recorded in the past the ratio of portfolio companies to investment manager the percentage of divestments carried out through initial public offerings and trade sales the membership of the national private equity association and the size of funds under management as characteristics of the highest importance in raising funds

bargaining size and return in venture capital funds abstract the terms of an investment by venture capitalists are the result of cooperative bargaining between the project originators owners or entrepreneurs and the financiers this study examines conditions under which bargains can be consummated the nature of the bargains and the way in which bargains are both influenced by venture fund size and also contribute to a theory of fund size as much as possible the theory of fund size and earnings is related to required rate of return concepts with the objective of explaining relative variations in the value of venture capital funds and of incorporating such investments within the general body of finance theory the most basic form of contract is a simple bilateral bargain between owners and fund managers with the shares of financing and earnings as the bargaining variables agency and other considerations can be factored into the resulting project value to be financed and partitioned an edgeworth box construction is used to establish the efficient pareto optimal set as the contract curve the two endpoints of the contract curve correspond respectively to the monopoly solution where there is one fund and many owners and to the competitive solution the nash bargaining solution of game theory can also be exhibited within this framework although we are careful to remain agnostic about whether or not this constitutes the only or even the best solution a first requirement is that some basis for agreement exists so that mutually beneficial bargains can actually be struck conditions most favorable to existence arise where 1 owners who cannot properly diversify their own investments are more risk averse or else suffer from some other financing impediment or 2 owners are more optimistic than fund managers on the prospects for the project fund size operating via the cost of capital can also affect the existence of solutions given that contracting is mutually beneficial the precise terms depend upon the relative bargaining power of funds versus owners this may depend upon required rates of return it also depends upon market structure the environment may be more conducive to monopoly surplus if search impediments exist for owners as they might for technological projects or if the market is in an early stage of development bargains are often asymmetric wherein the fund derives a higher share of earnings than pro rata with its share of financing fund size and bargaining power are related especially where fund investors or managers rely on the fund for portfolio or internal diversification as opposed to external diversification in which they invest extensively in other assets with internal diversification the fund s cost of capital is size dependent in terms of the number of projects on the books larger funds acquire bargaining power via a lower cost of capital leading to higher rates of actual returns and therefore higher fund value such effects are not present where investors have external diversification because fund returns are generally asymmetric arising from the significant risk of project failures it is sometimes thought that the asymmetry constitutes a factor to be priced as the asymmetry is size dependent this would make the cost of capital size dependent as well however it turns out that the asymmetry is not in fact priced and that standard capm arguments continue to hold thus for external diversification fund size is mainly a matter of economies of scale in administration evaluation and monitoring in all cases fund size can be described in terms of equality at the margin between required and available rates of return and we describe the influences that impinge on both schedules generally speaking the kinds of bargains actually observed as well as the rates of return and variations therein across funds and over time are all consistent with predicted bargaining features they appear also to be consistent with basic finance theory suggesting that special features such as failure to maximize the expected utility of monetary returns are not really needed

interest rate uncertainty and the financial intermediary s choice of exposure the financial intermediary s choice of operating as a broker with minimal risk exposure or as an asset transformer with interest rate risk is modeled as a funds inventory decision made prior to the resolution of uncertainty regarding the borrowing or lending interest rates it is shown that an increase in the interest rate uncertainty leads the intermediary to reduce its exposure thereby offering decreased asset transformation and more brokerage services however a stochastic increase in the interest rates leads to greater asset transformation and less brokerage services the high and volatile nominal interest rates associated with contemporary inflation have prompted a pronounced change in commercial bank balance sheets low cost deposits have been replaced by alternative funding vehicles bearing high and increasingly variable interest rates see budzeika 3 4 kane 9 and silber 13 in an apparent adaptive response to the loss of deposits banks have eschewed fixed rate loans in favor of variable rate lending thereby more closely matching the durations of their assets and liabilities see flannery 6 and boltz and campbell 2 this change in bank lending practices has been popularly interpreted as an effort to immunize cash flows in the face of increased interest rate uncertainty see haley 8 and wojnilower 15 however apart from niehans and hewson 11 the adaptive recomposition of bank balance sheets has not been formally addressed in this paper we provide a model of balance sheet duration mismatching and then show that an increase in interest rate volatility is likely to lead an intermediary to choose a balance sheet that is more closely matched 1 balance sheet mismatching can be understood in terms of the two basic functions of financial intermediaries as explained by niehans 10 brokerage and asset transformation if a financial intermediary precisely matches the properties of its assets and liabilities and thereby maintains a perfectly hedged position it functions exclusively as a broker joining borrowers and lenders without assuming any risk the broker s function is then simply to reduce the search costs associated with joining complementary transactors the brokerage function is deshmukh is professor of managerial economics and decision sciences greenbaum is harold l stuart professor of banking and finance and kanatas is assistant professor of finance all at northwestern university s j l kellogg graduate school of management we gratefully acknowledge the helpful suggestions of michael brennan and an anonymous referee this project was supported by the banking research center and the kellogg center for advanced study in managerial economics and decision sciences

why do venture capital firms exist theory and canadian evidence executive summary this paper investigates the role of venture capitalists we view their raison d etre as their ability to reduce the cost of informational asymmetries our theoretical framework focuses on two major forms of asymmetric informa tion hidden information leading to adverse selection and hidden ac tion leading to moral hazard our theoretical analysis suggests four em pirical predictions 1 venture capitalists operate in environments where their relative efficiency in selecting and monitoring investments gives them a comparative advantage over other investors this suggests strong industry effects in venture capital investments venture capitalists should be prominent in industries where infor mational concerns are important such as biotechnology computer software etc rather than in rou tine start ups such as restaurants retail outlets etc the latter are risky in that returns show high variance but they are relatively easy to monitor by conventional financial intermediaries 2 within the class of projects where venture capitalists have an advantage they will still prefer projects where monitoring and selection costs are relatively low or where the costs of informational asymmetry are less severe thus within a given industry where venture capitalists would be expected to focus we would also expect venture capitalists to favor firms with some track records over pure start ups

coexistence of public and private job agencies screening with heterogeneous institutions in response to the analysis of bureaucracies and the finding of inherent inefficiencies public choice theory argues for an increase in competition by contracting out government services and deregulation the paper explores the effect of coexisting public and private employment services in a model with private information of the worker about her ability and unobservable effort choice the employer s use of an efficient unemployment exchange and an efficient private agency may lead to optimal screening with first best contracts this is due to the assumption that good types of workers lose more human capital than bad types in periods of unemployment or mismatch in contrast to standard screening contracts a bad type of worker earns an information rent if the employment exchange is inefficient but the employer chooses not to use the private agency for good types

information reusability competition and bank asset quality this paper explains the recent decline in bank asset quality using the notion of information reusability banks are viewed as information processors they exist because of their advantage in extracting the surplus associated with the reusability of borrower specific information it is shown that a bank s incentive to screen loan applicants and hence maintain the quality of its assets depends on the surplus this screening can produce which in turn depends on information reusability two recent changes in banks operating environment are increased competitition and greater temporal volatility in borrower credit risks the former has directly reduced banks informational surplus while the latter has impaired information reusability hence screening expenditures have been reduced and the diminution of screening has lowered the quality of bank assets it is also shown that an increase in deposit insurance premia has an effect similar to that of narrowing interest spreads and therefore will result in reduced asset screening and impaired asset quality

analytical issues in external financing alternatives for sbes as the amount of information about an enterprise is generally not neutral with respect to firm size financiers have problems to identify the default risk associated with a borrower or to have control over a borrower s investments this review paper analyses how various control mechanisms are fit to reduce this information problem and how various types of capital suppliers are endowed to finance small business enterprises

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

on the positive role of financial intermediation in allocation of venture capital in a market with imperfect information this paper develops a theory of financial intermediation that highlights the contribution of intermediaries as informed agents in a market with imperfect information we consider a venture capital market where the entrepreneurs select the qualities of projects and their perquisite consumptions about which the investors are imperfectly informed it is shown that when all investors have positive search costs the entrepreneurs are induced to offer the unacceptable inferior projects lemons only and the investors will not enter the venture capital market but put their funds in other low return investments an undesirable allocation of resources beginning with an initial undesirable situation the financial intermediaries may evolve as informed agents that induce a pareto preferred allocation leading the investors to a higher welfare state we focus our analysis on the existence of intermediation equilibra when the market for intermediation services is competitive the distribution of returns on projects the fees charged by intermediaries and the fraction of institutional holdings are all endogenous in equilibrium it is shown that i there cannot be a competitive intermediation equilibrium with very high institutional holdings and ii in other cases multiple equilibra may exist but the one with the highest institutional holdings dominates the others in a pareto sense

in search of complementary assets the determinants of alliance formation of high tech start ups abstract why do new technology based firms ntbfs cooperate starting from teece s teece d j 1986 profiting from technological innovation implications for integration collaboration licensing and public policy research policy 15 285 305 conceptual framework and taking advantage of subsequent literature on alliance formation in the resource and competence based tradition and in the social structure perspective we derive an empirical model that aims at highlighting the inducements and obstacles that these firms face in alliance formation according to firm specific characteristics and the nature of the alliance in particular a distinction is made between exploitative commercial alliances and explorative technological alliances the econometric estimates based on a large sample of italian young high tech firms that are observed from 1994 to 2003 provide strong evidence supporting two key intuitions of teece s work first the combination of specialized complementary assets appears to be a key driver of the formation of exploitative commercial alliances by ntbfs more specifically patent holding affects positively the likelihood to establish commercial alliances but this propensity is found to rapidly decrease with firm size suggesting that as long as ntbfs become larger and possess specialized commercial assets their urge for commercial alliances diminishes second following the parallelism set forth by teece between search for alliance partners and access to external financing the analysis indicates that potentially beneficial alliances may not take place because of the high transaction costs faced by smaller ntbfs in this respect our results clearly support the view that sponsor institutions as public research organizations venture and corporate venture capitalists may sensibly reduce these costs and that their role crucially depends on both the identity of the sponsor and the type of alliance

marx and malthusianism comment in a recent article in this review 1984 samuel hollander suggests that the secular path of real wages in the marxian model tends toward a subsistence wage at which population growth ceases he attributes this decline to a higher growth rate in population relative to a positive but decreasing rate of growth in the demand for labor power from this he contends that in contrast to the malthusian prescription marx is open to the objection that with no check at all to the population growth rate the deterioration would have been sharper still p 148 the implication of hollander s argument is clear enough for if accepted it would necessarily lead one to dismiss marx s claim that every special historic mode of production has its own special laws of population historically valid within its limits alone an abstract law of population exists for plants and animals only and only in so far as man has not interfered with them capital i 1967 p 632 this comment takes issue with the thesis advanced by hollander on two major points first the secular decline in the value of labor power is a result of the increasing productivity of labor rather than the divergence between the respective growth rates in population and the demand for labor power second this is perfectly consistent with constant or even rising absolute real wages price of labor power for the active part of the working class 1 thus population control is neither a necessary nor a sufficient condition in assuring against falling real wages for a changing social productivity of labor put differently the supply of labor power to the advanced capitalist sector is the crucial supply variable not the rate of population growth i begin by reviewing hollander s useful distinction between marx s value of labor power and the classical school s minimum subsistence wage next it is shown that the value of labor power is determined by the social productivity of labor rather than factors exogenous to the system population the discussion is brought to a close by focusing on the prime mover of the path of relative real wages in the marxian model the endogenously determined supply of labor power surplus population to the advanced capital sector

corporate financial policy and the theory of financial intermediation this paper examines the optimal structure of financial contracts in an economy subject to two forms of moral hazard multiple information problems are shown to generate a role for multiple classes of financial claimants we then show that economic efficiency is enhanced if the financial structure of the economy consists of both direct and intermediated financial contract markets consequlently our results demonstrate a motivation for the complementarity between capital markets and depository financial institutions the purpose of this paper is to provide an analysis of the complementary roles of direct financial contract markets and intermediated financial contract markets in the modern theory of corporate finance the need to formulate such a model has been emphasized elsewhere by stiglitz 1985 and fama 1985 among others however an adequate explanation of this phenomenon has yet to be formulated the model described in this paper focuses on the role of multiple information problems in a theory of complex financial structure specifically in an environment with private action i e unobservable investment allocations and private information i e partially unobservable project cash flows multiple claimant classes arise to resolve the separate inefficiencies induced by moral hazard in our model the interaction of project risk and observability creates investment distortions which can be mitigated by increasing the number of outside claimant classes our results demonstrate explicitly the way in which a firm s optimal financial structure depends on the assumed configuration of an investment project s risk and observability characteristics under certain conditions we show that the optimal contractuai allocation in an economy with only direct financial contract markets consists of a debt contract and an outside equity claim this contractual configuration restores the efficient investment allocation decision we then consider the feasibility of an intermediated financial contract market in this setting we show that the existence of an intermediated financial contract market improves economic efficiency due to the reduced aggregate costs of

lending policies of financial intermediaries facing credit and funding risk this paper compares the optimal lending decisions of financial intermediaries that differ in their risk exposure all intermediaries are assumed to face a loan demand described by a random applicant arrival process with each applicant offering a unique risk adjusted rate of return loan demand is therefore uncertain in both quantity and quality the intermediaries differ in terms of their risk exposure because of disparate funding practices intermediaries functioning as brokers minimize their exposure by borrowing funds only as demand is realized whereas those behaving as asset transformers borrow in advance of realizing loan demand thereby maintaining a loanable funds inventory and sustaining the related exposure the optimal sequential lending policy is shown to involve setting a credit standard that becomes stricter with the length of the intermediary s planning horizon and the volume of loans outstanding most importantly it is shown that brokers adopt stricter credit standards than asset transformers and therby reduce their volume of lending