Innovation, Competition, and Investment Timing
In our model multiple innovators compete against each other by submitting investment proposals to an investor. The investor chooses the least expensive proposal and when to invest in it. Innovators have to provide costly effort and they learn privately the cost of investing. Multiple efforts have to be compensated for, but competition helps to erode innovators' informational rents, since innovators are more likely to lose the competition if they inflate investment costs. Consequently, competition leads to faster innovation, because the investor has less of a need to delay expensive investments. The investor's payoff sensitivity also increases with competition, thus enabling the investor to capture more of the upside of innovative activity.
|Date of creation:||Oct 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bengtsson, Ola & Sensoy, Berk A., 2009.
"Investor Abilities and Financial Contracting: Evidence from Venture Capital,"
Working Paper Series
2009-22, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Bengtsson, Ola & Sensoy, Berk A., 2011. "Investor abilities and financial contracting: Evidence from venture capital," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 477-502, October.
- Paul Klemperer, 1999.
"Auction Theory: A Guide to the Literature,"
- Fangruo Chen, 2007. "Auctioning Supply Contracts," Management Science, INFORMS, vol. 53(10), pages 1562-1576, October.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
- Jean-Jaques Laffont & Jean Tirole, 1985.
"Auctioning Incentive Contracts,"
403, Massachusetts Institute of Technology (MIT), Department of Economics.
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, 06-2016.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9187. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.