Venture capital financed investments in intellectual capital

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jedc.2005.07.005 Byline: Steffen JA[cedilla]rgensen (a), Peter M. Kort (b)(c), Engelbert J. Dockner (d) Abstract: The paper considers a new company in the IT industry, founded by a management team and partially financed by venture capital. Among the questions that the paper addresses are: how much venture capital should be acquired to help finance the development of the firm? How should a wish to grow, with the aim of making a breakthrough in the IT area, be balanced against the stockholders' wish to consume? The problem is studied as an optimal control problem with a random time horizon and we derive a series of prescriptions for investment and financial decisions. Author Affiliation: (a) Department of Business and Economics, University of Southern Denmark, Odense, Denmark (b) Department of Econometrics & Operations Research and CentER, Tilburg University, Tilburg, The Netherlands (c) Department of Economics, University of Antwerp, Antwerp, Belgium (d) Department of Finance and Vienna Graduate School of Finance, University of Vienna, Vienna, Austria Article History: Received 29 March 2004; Accepted 11 July 2005