Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58956
Authors: 
Inci, Eren
Parker, Simon C.
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6288
Abstract: 
We study entrepreneurs' start-up financing from banks and local financiers. An informal network, whose membership cannot be observed by outsiders, conveys the good signals it gets about the hidden types of network entrepreneurs to local financiers, which are then reflected in different loan terms. We show that there are winners and losers as a result of the network even among its members. Because all projects have positive net value, it is efficient to finance them even in the absence of a network. Thus, the formation of the network is inefficient as entrepreneurs incur networking costs for purely redistributive gains in the form of better loan terms as network members.
Subjects: 
entrepreneurship
financiers
networks
start-up financing
JEL: 
D82
G20
L26
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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