Conference Agenda

We study a dynamic economy in which heterogeneous entrepreneurs invest in either

generic or innovative technologies, the latter relying on intangible, firm-specific assets whose payoffs are realized through learning or experimentation (e.g., know-how, R&D). A key friction is that, to finance investment, entrepreneurs can pledge assets but not cash flows. We show that innovative technologies can \emph{relax} financing constraints by increasing the value of continuation relative to default, thereby enabling borrowing against future cash flows. Technology choice is non-monotonic in productivity: low-productivity entrepreneurs innovate-to-experiment and delay investment, intermediate types adopt generic technologies, and high-productivity entrepreneurs innovate-to-scale and relax financial constraints. In equilibrium, financial frictions distort both the allocation of capital and the choice of technology, leading to insufficient experimentation. The model helps us understand how innovation is adopted across firms and economies and has novel policy implications.

We develop a unified framework in which IPO practices operate not to manage asymmetric information but to prevent it from arising. Costly information acquisition gives investors an option to pick and choose among offerings, forcing the underwriter to offer a discount. IPO practices lower the value of this option—by diminishing the quality, relevance, or payoff of investor information---and thereby reduce the discount required to deter information production. This information-prevention perspective offers a coherent explanation for otherwise disparate practices, resolves persistent empirical puzzles about IPO allocations, and yields new implications for cornerstone investors and the JOBS Act.

Conventional wisdom holds that equity misvaluation reduces mergers and acquisitions (M\&A) efficiency by stimulating market timing. We show that this conclusion overlooks a critical dimension: the persistence of misvaluation. We develop and estimate a real options model in which persistent misvaluation reduces bidders' urgency to exploit the financing window, shifting incentives back to deals with stronger fundamental synergies. Overvaluation boosts merger activities but lowers deal quality. In the estimated economy these two effects approximately cancel, keeping aggregate M\&A value creation close to the no-misvaluation benchmark. This balance, however, hinges on persistence: transient, large-scale misvaluation can be sharply detrimental, while mild, persistent misvaluation can even push aggregate M\&A value creation \textit{beyond} the no-misvaluation benchmark. Price inefficiency, in this sense, can enhance real efficiency.