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Complementarity, coordination, and credit

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  • FEDELE, Alessandro
  • MANTOVANI, Andrea

Abstract

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.

Suggested Citation

  • FEDELE, Alessandro & MANTOVANI, Andrea, 2004. "Complementarity, coordination, and credit," CORE Discussion Papers 2004017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2004017
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-2004.html
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. A. Fedele & A. Mantovani & F. Liucci, 2010. "Credit availability in the crisis: which role for the European Investment Bank Group?," Working Papers 699, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Alessandro Fedele & Andrea Mantovani, 2010. "The Importance of Being Consulted," Annals of Economics and Finance, Society for AEF, pages 231-245.
    3. Artur Grigoryan, 2015. "Delegation in sovereign wealth funds," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(4), pages 363-380, December.

    More about this item

    Keywords

    complementarity; inside and outside coordination; moral hazard;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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