Project description
How firms solve market failures
While economic policy focuses on correcting market frictions such as financial constraints and information asymmetries, it has largely overlooked how firms themselves can strategically invest in technologies and information systems to mitigate these inefficiencies and improve resource allocation. The ERC-funded MACFRIC project addresses this puzzle by examining how businesses use internal technology and data to overcome economic hurdles. Through a two-part quantitative analysis, it explores how firms select specific physical assets to enhance borrowing capacity and how they design data strategies to improve decision-making and resource allocation. The project seeks highlight the role of private innovation alongside government intervention in overcoming systemic market barriers.
Objective
A central question of economics is how scarce resources should be allocated among competing needs. Over the past two decades, economists and policy makers have come to increasingly appreciate the importance of market frictions – e.g. informational, or financial, - in hindering the efficiency of resource allocation. This in turn has led to an avalanche of carefully designed corrective policies: from those that address financial sector stability to those that aim to boost market competition. For example, the central bank interventions in secondary markets for asset-backed securities – markets plagued by information asymmetries during the great financial crisis of 2008-09, - proved crucial in limiting the damage to the global economy. The lessons learned were responsible for the swift monetary-financial and fiscal responses during the COVID-pandemic. However, an important dimension of the problem has been overlooked so far: what investments/technologies can and should firms themselves make/adopt to overcome the inefficiencies caused by market frictions?
The goal of this proposal is to advance the state-of-the-art by addressing this question from multiple angles, using novel conceptual frameworks, firm-level data, and quantitative models. The proposal comprises two parts, each focusing on inefficiencies stemming from a specific friction. Part I centers on financial frictions, exploring how firms choose investment technologies, such as asset specificity, considering their impact on borrowing capacity and the efficiency of asset allocation. Part II delves into information frictions, investigating how firms choose information acquisition strategies, such as data investments, anticipating the impact of imperfect information on the efficiency of resource allocation.
Fields of science (EuroSciVoc)
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
This project has not yet been classified with EuroSciVoc.
Be the first one to suggest relevant scientific fields and help us improve our classification service
You need to log in or register to use this function
Keywords
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Programme(s)
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
-
HORIZON.1.1 - European Research Council (ERC)
MAIN PROGRAMME
See all projects funded under this programme
Topic(s)
Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Funding Scheme
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
HORIZON-ERC - HORIZON ERC Grants
See all projects funded under this funding scheme
Call for proposal
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
(opens in new window) ERC-2025-COG
See all projects funded under this callHost institution
Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.
08005 Barcelona
Spain
The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.