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Financing Innovation in the United States, 1870 to the Present$
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Naomi R Lamoreaux and Kenneth L Sokoloff

Print publication date: 2007

Print ISBN-13: 9780262122894

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262122894.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 19 September 2021

The Governance of New Firms: A Functional Perspective

The Governance of New Firms: A Functional Perspective

(p.405) 10 The Governance of New Firms: A Functional Perspective
Financing Innovation in the United States, 1870 to the Present

Josh Lerner

The MIT Press

This chapter examines entrepreneurs and their financiers and the frequently contentious interactions that come between them. To understand and study this, a functional approach is used, and thus the chapter seeks to highlight four general problems that plague these settings as well as how financiers addressed them using six classes of solutions. These four factors include uncertainty, asymmetric information, the nature of firm assets, and the conditions in the relevant financial and product markets, all of which suggest very real implications for entrepreneurs and executives. Intermediaries, on the other hand, responded to these conditions with certain sets of roles. The first relates to how firms are financed, while the second deals with the form of financing, which is critical in order to reduce potential conflicts. As a result, the chapter has sought out the systematic analysis on how firms are financed.

Keywords:   functional approach, asymmetric information, intermediaries, uncertainty, nature of firm assets

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