Essays on Incentive Contracting, R&D, and Growth

The dissertation contains three essays on the theory of incentive contracting. Chapter 1 studies a principal's optimal choice of an agent's freedom of action when information acquisition is endogenous. We show that full freedom of action need not be optimal even when there are no conflicts with respect to decisions that shall be implemented. Instead the principal forces the agent to take a clear stance, improving his incentives to acquire information ex ante. Chapter 2 deals with a procurement problem with endogenous information acquisition. We characterize and discuss the structure of optimal contracts. In particular we show that standard properties of procurement contracts with exogenous information structures may fail to hold when information is endogenous. The final chapter discusses the impact of financing constraints on industry structure and growth. We identify an indirect channel of influence: due to financing constraints, industry outsiders provide only weak competition to established firms. Therefore the latter can rest on their laurels, innovate less and thereby retard growth