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Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract
Corporate finance models and the theory of industrial organization have long been two separate fields of research. An integrating analysis is missing so far, although it is well known that financial market imperfections spill over to the product market and influence, in turn, the competitive strategies of firms.
Cornelia Neff

2. Financial structure and strategic competition

Abstract
In this chapter we point out that in contrast to the Modigliani-Miller Proposition, financial structure decisions of firms do matter. To show this, we first consider the financial structure decision of an individual firm (2.1). We summarize the Modigliani and Miller result that is derived when financial markets are perfect. Then, we briefly describe various issues of the theory of optimal capital structure.
Cornelia Neff

3. Credit financing and strategic competition

Abstract
In the present chapter we concentrate on debt financing of innovating and competing firms. Thus, we consider firms that are generally well established in the product market. These firms have sufficient firm age and reputation and are capable to provide collateral for bank loan financing. Debt financing is the most common form of external financing for firms in that stage: Bank loans account for about two thirds of external financing of corporate investments (Deutsche Bundesbank, 2001, 29).
Cornelia Neff

4. Venture capital financing and strategic competition

Abstract
In this chapter we first point out the financing alternatives for small and medium sized firms. Our analysis follows the financial growth cycle (see Berger and Udell 1998), which indicates the type of financing (debt or equity) a young firm receives at various stages of its life. The financial growth cycle states that newly founded firms are typically not eligible for bank loan financing due to the lack of collateral and reputation.1 Instead, a young firm has to rely on private equity or venture capital financing. We assume that the young firm has an innovative idea and needs external funding to realize a product innovation.
Cornelia Neff

5. Conclusion

Abstract
In the present analysis we assume that financial markets are imperfect due to asymmetric information. The information problem imposes agency costs on the financial contracting between a firm and its investor. The imperfections in financial markets will spill over to the product market, where they affect the firms’ innovation activities as well as their pricing strategies.
Cornelia Neff

Backmatter

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