Do Equity Financing Cycles Matter? Evidence from Biotechnology Alliances / Josh Lerner, Alexander Tsai.

Format:

Book

Author/Creator:

Lerner, Josh.

Contributor:

National Bureau of Economic Research.

Tsai, Alexander.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7464.

NBER working paper series no. w7464

Language:

English

Subjects (All):

Econometric models.

Econometrics.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Cambridge, Massachusetts : National Bureau of Economic Research, 2000.

Summary:

While the variability of public equity financing has been long recognized, its impact on firms has attracted little empirical scrutiny. This paper examines one setting where theory suggests that variations in financing conditions should matter, alliances between small R&D firms and major corporations: Aghion and Tirole [1994] suggest that when financial markets are weak, assigning the control rights to the small firm may be sometimes desirable but not feasible. The performance of 200 agreements entered into by biotechnology firms between 1980 and 1995 suggests that financing availability does matter. Consistent with theory, agreements signed during periods with little external equity financing that assign the bulk of the control to the corporate partner are significantly less successful than other alliances. These agreements are also disproportionately likely to be renegotiated if financial market conditions improve.

Notes:

Print version record

January 2000.