Complementarity, Coordination, and Credit

CORE Discussion Paper No. 2004/17

20 Pages Posted: 31 Mar 2007

See all articles by Alessandro Fedele

Alessandro Fedele

Free University of Bozen-Bolzano - Faculty of Economics and Management

Andrea Mantovani

Catholic University of Louvain

Date Written: April 2004

Abstract

We consider a start-up firm which applies for a bank loan to implement a project based on complementarity activities. The firm has the possibility to improve the complementarity effect by coordinating the activities. Coordination is costly and can be made either by using internal human resources or by hiring a consulting firm. In the former case the choice of coordination is not verifiable by the bank and a moral hazard problem arises, while in the latter information is symmetric. The role of consulting services is thus to mitigate the informational problem. Without consulting, the firm does not coordinate and either obtains no funding or the surplus of the project is not maximized.

Keywords: complementarity, inside and outside coordination, moral hazard

JEL Classification: D21, D82, O32

Suggested Citation

Fedele, Alessandro and Mantovani, Andrea, Complementarity, Coordination, and Credit (April 2004). CORE Discussion Paper No. 2004/17, Available at SSRN: https://ssrn.com/abstract=975909 or http://dx.doi.org/10.2139/ssrn.975909

Alessandro Fedele (Contact Author)

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

Andrea Mantovani

Catholic University of Louvain ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium