Do equity financing cycles matter?
Subtitle: evidence from biotechnology alliances
By: Josh Lerner, Alexander Tsai.
Contributors: Tsai, Alexander.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 7464; Working paper series (National Bureau of Economic Research) -- working paper no. 7464.
Publisher: National Bureau of Economic Research
Published: 2000
Place of publication: Cambridge, MA
Language: eng
Number of pages: 36
Subjects: Biotechnology industries -- United States -- Finance.; Research and development contracts -- United States.; Capital market -- United States.; Corporations -- United States -- Finance.
Description: While the variability of public equity financing has been long recognized, its impact on firms has attracted little empirical scrutiny. This paper examines one setting where theory suggests that variations in financing conditions should matter, alliances between small R&D firms and major corporations: Aghion and Tirole [1994] suggest that when financial markets are weak, assigning the control rights to the small firm may be sometimes desirable but not feasible. The performance of 200 agreements entered into by biotechnology firms between 1980 and 1995 suggests that financing availability does matter. Consistent with theory, agreements signed during periods with little external equity financing that assign the bulk of the control to the corporate partner are significantly less successful than other alliances. These agreements are also disproportionately likely to be renegotiated if financial market conditions improve.
Notes: "January 2000."

Includes bibliographical references (p. 30-32)

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