Contractual Execution, Strategic Incompleteness and Venture Capital

Roberta Dessi

No 465, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: Contractual execution generates hard information, available to the contracting parties, even when contracts are secretly executed. Building on this simple observation, the paper shows that incomplete contracts can be preferred to complete contracts. This is because (i) execution of incomplete contracts reveals less information to outside parties, giving rise to strategic gains; (ii) secretly executed complete contracts could not do better, given the possible strategic uses of the hard information generated by execution of the contract. The key effects at work are explored in the case of financial contracts for innovative start-up companies, providing a rationale for the observed differences in the extent to which venture capital contracts include a variety of contingencies, and for how this varies across industries and geographically.

JEL-codes: D82 D86 G24 L22 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-bec and nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://idei.fr/sites/default/files/medias/doc/wp/2009/contractual_execution.pdf Full text (application/pdf)

Related works:
Working Paper: Contractual Execution, Strategic Incompleteness and Venture Capital (2009)
Working Paper: Contractual Execution, Strategic Incompleteness and Venture Capital (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:7185

Access Statistics for this paper

More papers in IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse Contact information at EDIRC.
Bibliographic data for series maintained by ().