Do Equity Financing Cycles Matter?  Evidence from Biotechnology Alliances

Lerner, Josh; Tsai, Alexander C.

doi:10.3386/w7464

Cited by 47 publications

(85 citation statements)

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“…Im Falle einer niedrigen Liquidität ihres unternehmens hingegen sind die Manager jedoch gezwungen, nach neuen Allianzpartnern zu suchen, da anderenfalls das Überleben ihres unternehmens nicht gesichert werden kann. In diesen situationen sehen sie Allianzen offenbar als effiziente Mittel zur Kostensenkung und risikominimierung (Eisenhardt, schoonhoven, 1996) und sind bereit, die risiken opportunistischen Partnerverhaltens einzugehen und hohe Preise für eine Allianz zu bezahlen (Lerner et al, 2003).…”

Section: E Diskussion Und Implikationenunclassified

“…Für die Bedeutung fehlender Möglichkeiten zur Kapitalakquisition lässt sich eine analoge Begründung zur Liquidität anführen: Manager bevorzugen eigene finanzielle ressourcen, die sie über den Kapitalmarkt akquirieren können, gegenüber Allianzen für die Weiterentwicklung der ressourcenbasis ihres unternehmens. Fehlt der Zugang zu externem Kapital, werden höhere Preise und gefahren eines opportunistischen Verhaltens des Partners in Kauf genommen (Lerner et al, 2003). Die hohe Bedeutung fehlender Produktkandidaten in späten Entwicklungsstadien für die Allianzsuche ist dadurch zu erklären, dass die Bewertung eines Biotechnologieunternehmens stark an das Vorhandensein einer "reifen" Produktpipeline gekoppelt ist (rothaermel, Deeds, 2004).…”

Section: E Diskussion Und Implikationenunclassified

“…Aus der Perspektive der Firma, die um eine Allianz ersucht wird, ist es ebenso wichtig die Motive des suchenden Partners zu verstehen. Im Einklang mit existierenden Arbeiten von Lerner und Kollegen (Lerner et al, 2003) zeigen die resultate dieser Arbeit, dass, wenn die suchende Firma wenige finanzielle ressourcen besitzt und das Finanzierungsumfeld unattraktiv ist, die Zielfirma in einer starken Verhandlungsposition ist. Allerdings besteht die Möglichkeit, dass der suchende Partner nach Erhalt einer Zahlung im Zuge der Allianz oder bei sich ändernden Kapitalmärkten sich opportunistisch verhalten und seinen Teil zur Erfüllung der Allianz nicht beitragen wird.…”

Section: E Diskussion Und Implikationenunclassified

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Warum suchen Biotechnologieunternehmen strategische Allianzen? Eine experimentelle Untersuchung

Patzelt¹

2008

Z. Betriebswirtsch

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Section: E Diskussion Und Implikationenunclassified

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Warum suchen Biotechnologieunternehmen strategische Allianzen? Eine experimentelle Untersuchung

Patzelt¹

2008

Z. Betriebswirtsch

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“…Lerner and Tsai (1999) show that the allocation of control rights depends on the conditions for raising capital. If these conditions are bad, the control rights are by the venture capitalists.…”

Section: Control Rights Over the Firmmentioning

confidence: 99%

“…Here, a direct link to the topic discussed above (the interactions between investors, venture capitalists and entrepreneurs) occurs since venture capitalists can be seen as intermediaries between supply (investors) and demand (entrepreneurs). The impact of the supply side on the features of the contracts between venture capitalists and entrepreneurs has been shown empirically, based on the US data (see Gompers and Lerner, 2000;Lerner and Tsai, 1999), but not incorporated into theoretical research. Further, most models consider a single founder who bargains with the venture capital firm.…”

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confidence: 99%

What Do Economists Tell Us about Venture Capital Contracts?

Tykvová

2003

SSRN Journal

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Start-ups in innovative branches require a substantial amount of capital. Their founders may not have sufficient funds to finance the implementation of the ideas alone and might therefore look for outside financing. Additionally, new firms typically do not need only capital but also managerial advice. The banking sector does generally not want to take the extreme risks connected with young innovative firms on the one hand and, on the other hand, typically does not carry out advisory functions. High costs in combination with informal opacity are the reasons why small firms usually do not engage in public equity and debt underwriting, which leaves private capital as the most appropriate possibility. A special subgroup of private capital designed for young innovative firms is venture capital.The interactions between venture capitalists and their portfolio firms are characterized by high asymmetry of information, high risk, and uncertainty. The founder usually has only limited resources and her human capital is essential for the success of the project. Normally, there is no collateral available. Different kinds of agency problems are present in venture capital markets: moral hazard, adverse selection, hold-up problems, window dressing, etc. With the provision of capital, the VC firm takes over part of the risk and of the surplus from a project. This entails an incentive problem, since the founder may exercise less effort than if she had taken the whole profit on herself. Even if the effort of the founder is very high, a failure of the project may occur due to other circumstances. In such cases, the founder typically does not want to admit the failure and stop the project -as long as the venture capitalist finances it -which may lead to a continuation of loss-making projects and wasting of scarce resources. Additionally, the danger arises that the founder could squander or misuse the money she gets from the venture capitalist. The founder might invest in strategies and projects that have high personal returns but low expected monetary payoffs to the venture capitalist. If the founder participates in the profits but does not bear a large enough part of the losses, she might take too much risk.The relationship between a venture capitalist and an entrepreneur goes beyond the standard "principal -agent" framework. Venture capitalists' effort is essential for the success of the investment because the entrepreneur usually has neither enough business experience nor the necessary networks. Using its networks, a VC firm can help the company find appropriate staff, suppliers, customers, or other partners. Furthermore, the VC firm offers experience in managerial activities so that it may collaborate on the establishing of the optimal structure of the firm and participate in organizational, financial, strategic, and other decisions. It often assists in obtaining additional financing.Entrepreneurs and venture capitalists enter into contracts that influence their behavior and mitigate the agency costs. Typically, the contracts bet...

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Effective Control Rights in Vertical R&D Collaboration

Kloyer

2011

Manage. Decis. Econ.

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Because of increasing technological complexity of new products, the manufacturers of final products more often seek access to external sources of knowledge at the early, market-distant stages of innovation processes. However, they are confronted with a specifically high danger of moral hazard. Traditional management instruments fail to control that danger mainly for two reasons. First, the supplier activities are not transparent. Second, market-distant R&D results are credence goods whose quality cannot be evaluated, not even ex post. It is the theory of incomplete contracts that solves the problem by allocating the so-called control rights to the supplier. These rights primarily regulate the assignment of the intellectual property rights, the control of the R&D process, and the marketing of the final products that are based on the delivered R&D results. To date, we do not have any empirical evidence about the relative effectiveness of these control rights. Moreover, studies on incomplete contracts in R&D alliances only focused on the collaboration between biotechnology and pharmaceutical firms. Our study fills these gaps. On the basis of a sample of French and German R&D suppliers, we find that only enforceable intellectual property rights assigned to the supplier effectively control moral hazard. a The direction of the responses was reversed prior to the analysis. M. KLOYER 464

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Do Equity Financing Cycles Matter? Evidence from Biotechnology Alliances

Cited by 47 publications

References 0 publications

Warum suchen Biotechnologieunternehmen strategische Allianzen? Eine experimentelle Untersuchung

Warum suchen Biotechnologieunternehmen strategische Allianzen? Eine experimentelle Untersuchung

What Do Economists Tell Us about Venture Capital Contracts?

Effective Control Rights in Vertical R&D Collaboration

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