IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Innovation And Venture Capital Exits

  • Armin SCHWIENBACHER

    (The University of Namur)

Registered author(s):

    This paper addresses the choice between different exit routes of venture capitalists for a project yielding a quality-improving product innovation. We explicitly introduce product market characteristics into the analysis with the aim to identify their effects on the optimal exit strategy and on the financial contract. Going public can be more profitable than a trade sale (i.e., selling the venture to an existing company) when the new product is sufficiently innovative. This leads to an agency conflict if the entrepreneur enjoys private benefits from staying an independent manager in the firm after the exit of the venture capitalist. The entrepreneur has incentives to distort the innovation strategy so as to make an IPO the preferred exit. We derive the optimal financing strategy under different allocations of control rights and market power. The use of an optimal mix of debt and equity can partially mitigate such a distortion. We also discuss empirical implications and offer partial empirical evidence.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://128.118.178.162/eps/fin/papers/0111/0111005.pdf
    Download Restriction: no

    Paper provided by EconWPA in its series Finance with number 0111005.

    as
    in new window

    Length:
    Date of creation: 28 Nov 2001
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:0111005
    Note: Type of Document -
    Contact details of provider: Web page: http://128.118.178.162

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0111005. 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: (EconWPA)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.