Complementarity, Coordination and Credit

Alessandro Fedele and Andrea Mantovani

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We consider a start-up firm which applies for a bank loan to implement a project based on complementary 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.

Date: 2004
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Related works:
Journal Article: Complementarity, Coordination, and Credit (2008)
Working Paper: Complementarity, coordination, and credit (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:502

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