87524 - FINANCING INNOVATION: JVS, VENTURE CAPITAL AND CROWDFUNDING

Course Unit Page

  • Teacher Enrico Santarelli

  • Credits 6

  • SSD SECS-P/02

  • Teaching Mode Traditional lectures

  • Language Italian

SDGs

This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Industry, innovation and infrastructure

Academic Year 2019/2020

Learning outcomes

Successful innovation involves convincing others to provide the resources needed to implement new ideas. The course is aimed at providing the fundamentals of innovation financing, from the perspective of new and small firms, by integrating theory with empirical studies and case-studies. At the end of the course students will gain an understanding of the determinants of the choice among different financing models and achieve a good command of the best practices in the successful implementation of innovative ideas. In relation to Joint Ventures (JVs), students will focus their attention on the possibility for small firms to engage in a business agreement with other firms for the purpose of developing innovative projects. For the case of venture capital financing, students will be introduced from a comparative perspective to the procedures followed by venture capital firms when financing start-ups and early stage ventures. As for crowdfunding, students will learn about four different models: reward, equity, P2P lending, and charity.

Course contents

The course is aimed at providing the fundamentals of innovation financing, from the perspective of new and small firms. At the end of the course students will gain an understanding of the determinants of the choice among different financing models and achieve a good command of the best practices in the successful implementation of innovative ideas.

Learning outcomes

a. Knowledge and understanding

The course balances learning of concepts, development of analytical skills and practice in the financial management of start-ups, JVs, and SMEs involved in innovative activities. Besides focusing on some distinctive features of innovation financing from the perspective of the firm, the course explores this issue also from the perspective of investors. On the one side, it highlights strengths and weaknesses of ‘control rights’ theories of financing, in which firms follow an established hierarchy of preferences for modes of financing. On the other side, it discusses strengths and weaknesses of public policies supporting the creation of new technology-based firms and the formation of Research Joint Ventures (RJVs). The topics and practical approaches will consider the unique differences between developing the entrepreneurial free standing business and the corporate intrapreneurial development of new divisions, business units or product lines within a parent organization. The course provides an overview of:

  1. The theories and frameworks underpinning the process of new firm formation, internal and external growth, and survival;

  2. The appropriate theories and frameworks to systematically analyse the relation between forms of financing and the level of expenditure on research and development (R&D);

  3. The recent trends in the development of financial instruments aimed at supporting innovative activities by new entries, JVs, and SMEs from a comparative perspective;

    b. Cognitive skills

  1. Work with the appropriate data to analyse the patterns of innovation financing at the industry and the country level;

  2. Critically analyse relevant information using suitable conceptual tools;

  3. Critically apply conceptual knowledge to the development of firm innovation strategies and the design of public policies aimed at supporting innovative activities;

    c. Key skills

  1. Appropriately use quantitative and qualitative data to perform in-depth analyses of the financing of innovative activities;

  2. Develop strategies and draw policy recommendations;

  3. Support the choice of the optimal financing strategies for the undertaking of innovative activities;

    d. Professional skills

  1. Be able to learn from the feedback provided to become an independent learner;

  2. Be able to provide constructive feedback to others;

  3. Reflect on how analysis of best practices in innovation financing can inform the next steps of career progression and development as entrepreneur, consultant, policy maker, etc.;

    Blocks:

    Block 1

    *) The external financing of entrepreneurial ventures and innovation - Theory:

  • Debt;

  • Venture capital;

  • Crowdfunding;

  • Formal and informal equity funding;

  • Trade credit.

    Block 2

    *) The external financing of entrepreneurial ventures and innovation – Evidence:

  • Debt;

  • Venture capital;

  • Crowdfunding;

  • Formal and informal equity funding;

  • Trade credit.

Block 3

*) Discussion of case studies prepared by the students in relation to:

  • Real world situations;

  • Simulations.

Readings/Bibliography

Recommended readings:

Lerner, J., A. Leamon and F. Hardymon (2012). Venture Capital, Private Equity, and the Financing of Entrepreneurship. Wiley;

Casson, P.D., R. Martin and T.M. Nisar (2008). The Financing Decisions of Innovative Firms. Research in International Business and Finance, 22(2): 208-221;

Chan, Y.S. (1983). On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information. Journal of Finance, 38(5): 1543-1568;

Mollick, E. (2014). The Dynamics of Crowdfunding: An Exploratory Study. Journal of Business Venturing, 29(1): 1-16;

Rossi, A. and S. Vismara (2018). What Do Crowdfunding Platforms Do? A Comparison Between Investment-based Platforms in Europe. Eurasian Business Review, 8(1): 93-118.

Signori, A. and S. Vismara (2018). Does Success Bring Success? The Post-offering Lives of Equity-crowdfunded Firms. Journal of Corporate Finance, 50: 575-591.

Supplementary readings:

Teaching slides and additional material available to download from the IOL platform.

Teaching methods

Lectures, class discussions, coursework.

 

Assessment methods

Coursework (40%), final written exam (60%).

 

Teaching tools

Other teaching material, including slides used during the lectures and papers will be made available to students on a weekly basis through the iol system.

Office hours

See the website of Enrico Santarelli