48 Pages Posted: 10 Feb 2012 Last revised: 24 Jan 2015
Date Written: December 19, 2014
We model an economy where it is beneficial for high-type organizations to collaborate with other high types, and where this assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The expected funding benefit associated with finding high-type partners increases in the supply of informed capital, which creates an additional incentive for high types to search. Our main result is that, in such a setting, a critical mass of informed capital is sometimes required for an efficient equilibrium to obtain. We provide a novel channel for how the financial sector can impact real outcomes, specifically by affecting matching patterns.
Keywords: financial intermediation, matching, venture capital
JEL Classification: D20, D80, G24, G32, L20
Suggested Citation: Suggested Citation
Anjos, Fernando and Drexler, Alejandro, Inter-Company Matching and the Supply of Informed Capital (December 19, 2014). Journal of Economic Behavior and Organization, Vol. 111, 2015. Available at SSRN: https://ssrn.com/abstract=2002287 or http://dx.doi.org/10.2139/ssrn.2002287
By Baixiao Liu