Inter-Company Matching and the Supply of Informed Capital
University of Texas at Austin
University of Texas at Austin - McCombs School of Business
June 17, 2013
We model an economy where it is beneficial for high-type organizations to collaborate with other high types (assortative matching), and where the assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The funding benefit associated with finding a high-type partner provides an additional incentive for search, and we show how a critical mass of informed capital sometimes becomes a necessary condition for an efficient equilibrium to obtain. We also conduct a brief empirical analysis - combining data on alliances and venture-capital deals - that yields results consistent with the mechanisms proposed in the model.
Number of Pages in PDF File: 61
Keywords: venture capital, financial intermediation, alliances, matching
JEL Classification: D20, D80, G24, G32, L20working papers series
Date posted: February 10, 2012 ; Last revised: June 17, 2013
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