How Novelty Aversion Affects Financing Options
Bibliographic Data
| ID | 8246761 |
|---|---|
| Authors | Amar Bhidé (0000-0002-2171-5377, Tufts University, corresponding author) |
| Year | 2006 |
| Volume | 1 |
| Issue | 1 |
| Publication date | 2006-01-22 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Capitalism and Society (JOURNAL) |
| Journal identifiers | ISSN: 1932-0213 • E-ISSN: 2194-6140 |
| Publisher | Walter de Gruyter GmbH (PUBLISHER • DE) |
| DOI | 10.2202/1932-0213.1002 |
| OpenAlex | W91044631 |
| Language | EN |
| Citations received | 3 |
| References cited | 13 |
Entrepreneurs may undertake bad projects because they unwittingly rely on defective or incomplete information to estimate the returns. Investors' concerns about such misjudgements are relatively low when the entrepreneurs' knowledge about their projects has been well calibrated. But if the novelty of the project (or some other unusual circumstance) makes calibration impossible, investors may reject the entrepreneur's funding request. This `novelty aversion' effect helps explain why ventures that are initially self-financed can subsequently attract outside financing without any decrease in standard 'incentive' or moral hazard problems. It also provides new insights about the differences in the investment preference and procedures of individual 'angel' investors, venture capital partnerships and large public companies.Comments on this paper can be found at: http://ssrn.com/abstract=2205773
Actuarial science · Business · Economics · Entrepreneurial finance · Expected utility hypothesis · Financial economics · Incentive · Investment (military · Microeconomics · Moral hazard · Novelty · Political science · Preference · Risk aversion (psychology · Venture capital · Corporate Finance and Governance · Entrepreneurship Studies and Influences · Private Equity and Venture Capital · Finance
The Origin and Evolution of New Businesses
The structure and governance of venture-capital organizations
Games with Incomplete Information Played by “Bayesian” Players, I–III Part I. The Basic Model
Venture capital and the structure of capital markets
The structure of scientific revolutions
The Visible Hand
Why Start-Ups
How Novelty Aversion Affects Financing Options
Fallibility in Human Organizations and Political Systems
| Unique citing works | 3 |
|---|---|
| Citations per year | 0,15 |
| Citation span | 2006 - 2026 (21) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 3 |