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Designing a Mechanism to Provide Government Facilities to Knowledge-Based Companies
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Alireza Erfani *   , Azadeh Talebbeydokhti |
| Faculty of Economics, Management & Administrative Sciences , aerfani@semnan.ac.ir |
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Abstract: (563 Views) |
Knowledge-based companies often need the participation of venture capitalists or government facilities for prototyping and industrial production of their products. Since, in such cases, hidden behavioral issues such as adverse selection and moral hazard will emerge, in this study, we are looking for the design of mechanisms to explain the optimal conditions for providing government facilities to these knowledge-based companies by considering these behavioral issues. The mechanism to achieve the desired goal is to provide two facility provision contracts: a contract with the entrepreneur's maximum financial commitment and minimum facility rate and the other with the entrepreneur's minimum financial commitment and maximum facility rate. Given that government facilities have a social cost, it is appropriate for the government to enter projects with positive externality but not supported by venture capitalists. This minimizes the redundancy of projects.
Inspired by the study of Lach et al. (2020) and calibrating the parameters based on the reports of the Presidential Vice President for Science and Technology, banking information, and research and technology funds in 2020, the simulation of the model for Iran's economy showed that the implementation of the second contract leads to higher social welfare. The government's financial support to reduce the redundancy of facilities, along with the private sector's support, improves social welfare.
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| Keywords: Knowledge-based Companies, Venture Capitalist, Mechanism Design, Government Facilities, Iran's economy |
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Full-Text [PDF 874 kb]
(135 Downloads)
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Type of Study: Research |
Subject:
Special
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