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Entrepreneurial finance and economic growth

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  • Paolo Giordani

Abstract

This paper incorporates the process of entrepreneurial finance into an endogenous growth model with horizontal innovation (Romer J Polit Econ 98:S71–S102, 1990 ; Jones J Polit Econ 103(4):759–784, 1995b ). To capture the market frictions existing in the financing of innovation, entrepreneurial finance is described as a process of “search and matching” between entrepreneurs proposing their innovative ventures and capitalists selecting and financing the most valuable projects. We determine the amount of resources devoted to innovation along the balanced growth path. The welfare analysis highlights the sub-optimality of the equilibrium innovative efforts due to search and bargaining frictions. We analyze the role of the policy maker to restore the optimality of investments in innovation. Copyright Springer-Verlag Wien 2015

Suggested Citation

  • Paolo Giordani, 2015. "Entrepreneurial finance and economic growth," Journal of Economics, Springer, vol. 115(2), pages 153-174, June.
    • Handle: RePEc:kap:jeczfn:v:115:y:2015:i:2:p:153-174
    DOI: 10.1007/s00712-014-0411-7
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    References listed on IDEAS

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    Cited by:

    1. Cipollone, Angela & Giordani, Paolo E., 2019. "Market frictions in entrepreneurial innovation: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 297-331.
    2. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    3. David Urbano & Sebastian Aparicio & David Audretsch, 2019. "Twenty-five years of research on institutions, entrepreneurship, and economic growth: what has been learned?," Small Business Economics, Springer, vol. 53(1), pages 21-49, June.
    4. Sergio Salas, 2018. "On financial deepening and long-run growth," Journal of Economics, Springer, vol. 123(3), pages 249-276, April.

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    More about this item

    Keywords

    Financing of innovation; Search and matching process; Endogenous growth; 031; 041; L26;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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