financial contracting theory meets the real world an empirical analysis of venture capital contracts we compare the characteristics of real world financial contracts to their counterparts in financial contracting theory we do so by studying the actual contracts between venture capitalists vcs and entrepreneurs the distinguishing characteristic of vc financings is that they allow vcs to separately allocate cash flow rights board rights voting rights liquidation rights and other control rights we describe and measure these rights we then interpret our results in relation to existing financial contracting theories we also describe the interrelation and the evolution across financing rounds of the different rights query 1 query 2

evolution of the economics of agricultural policy agricultural economists helped develop farm programs to respond to the dire economic situation of the 1920s and 1930s some early authors appreciated that such policies created problems in markets for commodities and inputs over time our understanding of agricultural issues and policies has deepened through the application of improved models and tools of analysis to more extensive data we have developed better answers to old questions and have responded to changing policy instruments market contexts and policy concerns this article traces the evolution of our deepening economic understanding of the causes and consequences of agricultural policy

measuring the returns of r d an empirical study of the german manufacturing sector over 45 years abstract motivated by recent statistics that show significant growth in labor productivity this paper seeks to analyze the long term relationship between domestic rd recent rates of return on r d are estimated to have reached an all time low spanning the last 45 years current yields of r d are only one third compared to the sixties in conclusion though the productivity slowdown of the seventies seems to have been overcome this is not attributed to r d investments

government as fund of fund and vc fund sponsors effect on employment in portfolio companies governments around the world have set up fund of fund programs to increase the supply of venture capital financing to young growth oriented firms in these programs a government fund of fund acts as limited partner in a venture capital fund the venture capital investment process is hereby delegated to external investors which were selected by the government fund of fund we investigate employment growth in 108 portfolio companies that benefited from the arkimedes fund of fund in flanders accounting for the heterogeneity in the types of venture capital investors managing hybrid funds and the associated goal diversity and resource endowments we find that portfolio companies backed by hybrid independent venture capital funds show greater employment growth than those backed by hybrid captive or hybrid government venture capital funds this finding is relevant because it indicates that the financial objectives of hybrid independent venture capital funds are highly compatible with the government s objective of employment growth as providing companies with superior monitoring and value adding services with the objective of realizing a successful exit creates employment in the process

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

the participation of new technology based firms in eu funded r d partnerships the role of venture capital this paper investigates the participation of new technology based firms ntbfs in eu funded r d partnerships we examine whether venture capital vc backed firms are more likely to enter these partnerships than their non vc backed peers and the role of the ownership and governance of the vc investor we resort to a mixed method approach we use qualitative information collected through interviews with managers of ntbfs and vc firms to better illustrate our deductively derived theoretical hypotheses that are then tested through a large scale econometric analysis the econometric analysis takes advantage of the vico dataset which includes longitudinal data on 8346 ntbfs from seven european countries observed from 1995 to 2008 out of which 758 were vc backed the econometric results show that vc backing has a strong positive impact on ntbfs participation in eu funded r d partnerships but the magnitude of this effect rapidly decreases with ntbfs prior experience of this type of partnership moreover the magnitude of the impact of vc backing considerably differs depending on the type of investor with bank and government vc exhibiting the strongest positive effects

academic research and industrial innovation the purpose of this study is to estimate the extent to which technological innovations in various industries have been based on recent academic research and the time lags between the investment in recent academic research projects and the industrial utilization of their findings because no attempt to my knowledge has been made to estimate the social rate of return from academic research we also make some rough and tentative estimates of this sort while the results are subject to many limitations discussed below they should be of interest to public policy makers concerned with science and technology as well as to

endogenous commodity policies and the social benefits from public research expenditures standard analyses of social benefits of public agricultural research expenditures in the presence of commodity policies take the commodity policy as fixed in reality governments adjust commodity policy levels when the research has important income distributional effects we use two examples of commodity policies to analyze the consequences of endogenizing commodity policies under three alternative decision making models of government relaxing the assumption of fixed commodity policies has important impacts on conclusions regarding the social benefits of research in the presence of commodity policies

stage financing and the role of convertible securities venture capital financing is characterized by extensive use of convertible securities and stage financing in a model where a venture capitalist provides staged financing for a project we illustrate an advantage of convertible debt or warrants over a mixture of debt and equity essentially when the venture capitalist retains the option to abandon the project the entrepreneur has an incentive to engage in window dressing and bias positively the short term performance of the project reducing the probability that it will be liquidated an appropriately designed convertible security prevents such behaviour because window dressing also increases the probability that the venture capitalist will exercise the conversion option becoming the owner of a substantial fraction of the project s equity

the impact of the affiliation of venture capital firms a survey the aim of this paper is to review the theoretical and empirical literature on the impact of the affiliation of venture capital vc firms with a particular focus on the differences between europe and the us a main characteristic of vc firms is their high level of involvement in the management of funded firms however the vc industry is composed of heterogeneous actors the literature has studied to a great degree the independent funds that dominate the us market yet there also exist vc funds affiliated with banks or with industrial firm which can benefit from synergies with their parent corporation several studies have highlighted significant differences between these types of vc firms

what do economists tell us about venture capital contracts venture capital markets are characterized by multiple incentive problems and asymmetric information in an uncertain environment all kinds of agency problems are present moral hazard adverse selection hold up problems window dressing etc entrepreneurs and venture capitalists enter into contracts that influence their behavior and mitigate the agency costs in particular they select an appropriate kind and structure of financing and specify the rights as well as the duties of both parties the typical features of venture capital investments are an intensive screening and evaluation process an active involvement of venture capitalists in their portfolio companies a staging of capital infusions the use of special financing instruments such as convertible debt or convertible preferred stock syndication among venture capitalists or a short investment horizon

robust financial contracting and the role of venture capitalists we derive a role for inside investors such as venture capitalists in resolving various agency problems that arise in a multistage financial contracting problem absent an inside investor the choice of securities is unlikely to reveal all private information and overinvestment may occur an inside investor however always makes optimal investment decisions if and only if he holds a fixed fraction contract where he always receives a fixed fraction of the project s payoff and finances that same fraction of future investments this contract also eliminates any incentives of the venture capitalist to misprice securities issued in later financing rounds in this article we develop a model of financial contracting with multiple investment decisions and show how conflicts of interest and informational asymmetries can be effectively resolved by an inside investor i e an investor who not only provides capital but also works closely with the firm monitors it frequently and is generally very well informed about the firm s prospects and investment opportunities venture capitalists are obvious examples of inside investors and their function has been an important motivation for this article banks especially in japan and germany are also involved in monitoring and can be viewed as playing the role of inside investors in this article we examine the potential benefits of inside investors in a context where there are no restrictions beyond limited liability on the type of financial contracts that can be written we address a basic financial contracting problem involving an entrepreneur who has an idea for a project but does not have sufficient capital to fund it an important assumption is that there are several stages in the project s development and that a decision must be made at each stage whether the project should be continued or abandoned if the project is continued the amount of additional capital to be invested must also be determined we assume that the entrepreneur as an insider observes private information about the project s profitability at each stage this information is not

alternative information sources and the information content of bank loans this paper examines the information content of bank loan agreements we differentiate borrowers according to financial analysts percentage earnings forecast errors and most recent forecast revisions the empirical results suggest that banks rely on other indicators as initial screening devices to determine where to best deploy their evaluation and monitoring efforts if these other indicators are reliable and signalimproving prospects banks do little further investigation however if the indicators are noisy and signal declining prospects banks have incentives to expend resources to investigate the borrowers resulting in the production of valuable information recent theories of financial intermediation concentrate on the role of banks in reducing informational asymmetry leland and pyle 1977 suggest that informational asymmetries may be the primary reason that intermediaries exist campbell and kracaw 1980 demonstrate that an important function of financial intermediation is the production of information diamond 1984 develops a model which shows that financial intermediaries can exist simply because they provide an efficient means of evaluating and monitoring borrowers these information transmission theories argue that banks provide unique information production services in an imperfect capital market they suggest that banks know more about the prospects of the firms they lend to than do others thus bank loan agreements should convey useful information to the market a number of researchers empirically examine the uniqueness of bank loans fama 1985 approaches the issue by examining the rates on certificates of deposit and other high grade commercial papers he concludes that since bank borrowers bear the cost of reserve requirements there must be something special about bank loans james 1987 conducts an event study around the announcement of bank credit agreements and reports a significantly positive two day announcement return his results provide evidence support

a survey of the literature on human capital intensive firms the aim of this paper is to provide an exhaustive survey of the academic research dedicated to the study of human capital intensive firms hcifs we use a bibliometric analysis based on the three widely used databases econlit science direct and wiley over the period 1992 2015 we are adapting a methodology developed in previous works to our specific object of study and we generate a bottom up clustering on keywords titles and abstracts our examination of the data sheds a light on five main clusters of works that respectively focus on 1 critical human resource management 2 intellectual capital assessment 3 funding risk and innovation 4 high skilled employees supporting economic development and 5 internal and external valuable social networks in a critical appraisal of our results we stress that the bibliometric analysis remains silent on how the different clusters are linked with each other based on our own appreciation of the hcifs literature we propose a further step in the identification of a central question linking up these clusters a transversal review of the five clusters reveals that hcifs appear as a network of specialized agents whose complementary human resources are decisive for the value creation process

venture capital financing moral hazard and learning we consider the provision of venture capital in a dynamic agency model the value of the venture project is initially uncertain and more information arrives by developing the project the allocation of the funds and the learning process are subject to moral hazard the optimal contract is a time varying share contract which provides intertemporal risk sharing between venture capitalist and entrepreneur the share of the entrepreneur reflects the value of a real option the option itself is based on the control of the funds the dynamic agency costs may be high and lead to an inefficient early stopping of the project a positive liquidation value explains the adoption of strip financing or convertible securities finally relationship financing including monitoring and the occasional replacement of the management improves the efficiency of the financial contracting

interdependencies between the science and technology infrastructure and innovation activities in german regions empirical findings and policy consequences abstract regional studies have detected interdependencies between the technological infrastructure and the innovation activities of the respective regions it is commonly agreed that the private knowledge base of companies in a region is supplemented by the public knowledge of research institutes located in the region on account of the accumulation of knowledge and regional effects competitive regional specialisation patterns evolve this paper follows studies from the united states and underlines the mostly positive influence between the public science infrastructure and the industrial science and technology output the empirical part deals with the federal states laender of germany for two of them baden wuerttemberg bw and north rhine westphalia nrw an innovative in depth analysis based on a breakdown of activities in 18 technology areas is presented consequences for science and technology policy are discussed

the political economy of public research investment and commodity policies in agriculture an empirical study the paper tests a political economy theory of simultaneous government decision making on income redistribution through commodity policies and on public research investment in agriculture we use data from 37 countries on agricultural protection and public agricultural research expenditures pari the empirical results are consistent with the political economy hypotheses the analysis suggest that structural changes in the economy have important effects on the political incentives for governments not only to subsidize or tax farmers but also to invest in public agricultural research furthermore the analysis supports the hypotheses that the impact of such structural changes on government decision making on pari is non linear and conditional on other factors regarding the impact of political institutions the results suggest that more democracy neither leads to more distortionary transfers agricultural protection nor to lower investment in public goods pari

financing and advising optimal financial contracts with venture capitalists this paper analyses the joint provision of effort by an entrepreneur and by an advisor to improve the productivity of an investment project without moral hazard it is optimal that both exert effort with moral hazard if the entrepreneur s effort is more efficient less costly than the advisor s effort the latter is not hired if she does not provide funds outside financing arises endogenously this explains why investors like venture capitalists are value enhancing the level of outside financing determines whether common stocks or convertible bonds should be issued in response to incentives

judging agricultural policies a survey this survey provides a structured picture of 40 years of literature which uses welfare economic tools to judge agricultural policy challenges and developments of normative agricultural policy analysis are discussed in an easily accessible graphical framework it is shown how the literature has gone from examining a very small discrete set of simple policies to a much broader often continuous set of policies that combine policy instruments simultaneously the importance of the pareto criterion used to explore the limits of how government can affect welfare is revealed moreover given the importance of the objective of income redistribution in agricultural policy agricultural economists have often departed from the purely efficiency oriented tradition in economics it is shown that they have tried to incorporate equity considerations by either adding these criteria as constraints to the social welfare function or directly incorporating these criteria in the functional form of the social welfare function

corporate venturing allocation of talent and competition for star managers we provide new rationales for corporate venturing based on competition for talented managers as returns to venturing increase firms engage in corporate venturing for reasons other than capturing these returns first higher venturing returns increase managerial compensation to which firms respond by increasing incentives managers increase effort prompting firms to reallocate them to new ventures where the marginal product of effort is highest second as returns to venturing become large corporate venturing emerges as a way to recruit retain managers who would otherwise choose alternative employment we derive several testable empirical predictions about the determinants and structure of corporate venturing

a theory of strategic venture investing some venture capital investors seek purely financial gains while others such as corporations also pursue strategic objectives the paper examines a model where a strategic investor can achieve synergies but can also face a conflict of interest with the entrepreneur if the start up is a complement to the strategic partner it is optimal to obtain funding from the strategic investor if the start up is a mild substitute the entrepreneur prefers an independent venture capitalist with a strong substitute syndication becomes optimal such that the independent venture capitalist is the active lead investor and the strategic partner a passive co investor the expected returns for the entrepreneur are nonmonotonic lowest for a mild substitute and higher for a strong substitute as well as for a complement the paper also explains why a strategic investor often pays a higher valuation than an independent venture capitalist

the r d performance through time of young high technology firms methodology and an illustration abstract this paper summarizes the pilot stage of a microeconomic study of the innovation performance through time of young high technology israeli firms it reports some results for a successful firm designing producing and selling electronic instruments and systems the paper begins by surveying some of the difficulties surrounding the collection and organization of data on r d projects one of them concerns the definition of the unit for analysis the r d project three criteria are suggested for dividing the stream for innovative activities into r d projects and these are applied to group the tens of products accessories and systems included in the analysis into nine projects the paper subsequently defines a measure of direct project performance or profitability estimate discounted operating profits per unit of fixed costs and provides estimates based on r d and sales data for the products of each project the final sections analyze the variation of project profitability through time the increasing profitability observed across generations of a product class is attributed to the adaptability of the firm to changes in the environment particularly to the availability of new technology which requires the swift design and sale of more complex products the qualitative history of the various projects suggests that this adaptability is due to a large extent to the skills infrastructure and reputation of the firm accumulated from prior projects i e that the indirect profitability of the latter is high some estimates of the indirect profitability of early projects are presented a comparison of the spin off mechanisms observed in the firm analyzed with those observed in firms of other industries is also undertaken

the welfare economics of a biofuel tax credit and the interaction effects with price contingent farm subsidies a framework is developed to analyze the effects of a biofuel consumer tax exemption and the interaction effects with a price contingent farm subsidy ethanol prices rise above the gasoline price by the amount of the tax credit corn farmers gain directly while gasoline consumers only gain from any reduction in world oil prices due to the extra ethanol production domestic oil producers lose historically the intercept of the ethanol supply curve is above the gasoline price hence part of the tax credit is redundant and represents rectangular deadweight costs that dwarf triangular deadweight cost measures of traditional farm subsidies copyright 2007 oxford university press

optimal leverage and aggregate investment we analyze the optimal financing of investment projects when managers must exert unobservable effort and can also switch to less profitable riskier ventures optimal financial contracts can be implemented by a combination of debt and equity when the risk shifting problem is the most severe while stock options are also needed when the effort problem is the most severe worsening of the moral hazard problems leads to decreases in investment and output at the macroeconomic level moreover aggregate leverage decreases with the risk shifting problem and increases with the effort problem

eu agri environmental programs and the restaurant table effect the share of agricultural area enrolled in eu agri environmental programs varies significantly between eu member states these national differences are explained based on a model that reflects both that these programs internalize externalities and the political economy we identify six factors that affect the extent to which agri environmental programs are implemented environmental benefits opportunity costs of participation budgetary pressure the share of program expenditures financed by the eu the political weight attributed to farmers at the national and the political influence of each country at the eu level in addition we demonstrate that if the policy decision making process is noncooperative at the eu level countries that contribute less to the eu budget will ceteris paribus implement more programs using data of four years and feasible generalized least square methods we are able to confirm our theoretical results including a noncooperative behavior of eu member states

patent statistics in the age of globalisation new legal procedures new analytical methods new economic interpretation abstract patent analysis seems to become more difficult in the age of globalisation starting from microlevel observations it is evident that multinational enterprises pursue different technological marketing and strategic aims in effect they cover world markets in a distinctly different manner with patent intellectual property this article in good economic tradition starts with consideration of recent microlevel patent behaviour in telecommunications before new macroeconomic procedures to measure technical change are outlined the new challenges to patent statistics comprise the assignment of countries to patent documents of multinational firms the appropriate use of economic filters in comparing patent statistics from various patent offices the fitting of the new international patent procedures offered by the amended patent cooperation treaty pct to national statistics the assignment of patent applications in case of withdrawn country destinations and the estimation of time series if most recent data sets are incomplete we propose consistent workable adjustments to patent statistics that overcome the above mentioned biases which we denote the triad patent model for measuring technical progress in the proper economic sense first applications deal with the assessment of the pace of technical change in major countries up until 1995 in conclusion we discuss problems for future research the main policy implication is that macroeconomic patent statistics can correct for the effects of global knowledge production indeed as these are not disruptive but rather limited and well accountable