Abstract

http://ssrn.com/abstract=1657937
 
 

References (96)



 
 

Citations (11)



 


 



Financing Risk and Innovation


Ramana Nanda


Harvard University - Entrepreneurial Management Unit

Matthew Rhodes-Kropf


Harvard Business School - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

March 5, 2014

Harvard Business School Entrepreneurial Management Working Paper No. 11-013

Abstract:     
We provide a model of investment into new ventures that demonstrates why some places, times and industries should be associated with a greater degree of experimentation by investors. Investors respond to financing risk ― a forecast of limited future funding ― by modifying their focus to finance less innovative firms. Potential shocks to the supply of capital create the need for increased upfront financing, but this protection lowers the real option value of the new venture. In equilibrium, financing risk disproportionately impacts innovative ventures with the greatest real option value. We propose that extremely novel technologies may need `hot' financial markets to get through the initial period of discovery or diffusion.

Number of Pages in PDF File: 44

Keywords: Innovation, Venture Capital, Investing, Experimentation, Market Cycles, Financing Risk

JEL Classification: G24, O31

working papers series


Download This Paper

Date posted: August 13, 2010 ; Last revised: March 6, 2014

Suggested Citation

Nanda, Ramana and Rhodes-Kropf, Matthew, Financing Risk and Innovation (March 5, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 11-013. Available at SSRN: http://ssrn.com/abstract=1657937 or http://dx.doi.org/10.2139/ssrn.1657937

Contact Information

Ramana Nanda (Contact Author)
Harvard University - Entrepreneurial Management Unit ( email )
Boston, MA 02163
United States
HOME PAGE: http://www.people.hbs.edu/rnanda
Matthew Rhodes-Kropf
Harvard Business School - Entrepreneurial Management Unit ( email )
Soldiers Field Road
Rock Center 312
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,832
Downloads: 672
Download Rank: 20,026
References:  96
Citations:  11
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.328 seconds