Staging of Venture Financing, Investor Opportunism, and Patent Law

摘要: Ventures are often financed in several stages. Stage financing provides a real option valuable when facing external uncertainty. However, stage may also induce investor opportunism, if the property rights on an invention not sufficiently protected. We look at case where incumbent demands greater share venture's return before next stage. If entrepreneur does agree, might use idea for his own purposes. This threat force to continue under less favorable financial terms. As consequence, however, she choose effort level that is too low (underinvestment). Investor opportunism likely occur, investor's residual cash-flow-rights contingent verifiable 'milestones' previous Such provisions quite common. The impact of patent law important. So far, it has primarily been seen as instrument balancing trade-off between setting incentives innovate and limiting monopoly power holders. I argue there additional goal law: Namely, mitigating conflicts interest venture process, thereby making innovations more likely.