We consider a start-up firm which applies for a bank loan to implement a project based on complementarity activities. The firm has the possibility to improve the complementarity effect by coordinating the activities. Coordination is costly and can be made either by using internal human resources or by hiring a consulting firm. In the former case the choice of coordination is not verifiable by the bank and a moral hazard problem arises, while in the latter information is symmetric. The role of consulting services is thus to mitigate the informational problem. Without consulting, the firm does not coordinate and eitherobtains no funding or the surplus of the project is not maximized.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2004017.
Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
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