An increased level of monitoring and pricing of risks could also be beneficial for the financing of innovations. This is because both reduce the information asymmetry and lead to a greater allocative efficiency. Hence risky innovative projects with a reasonable likeliness of success might pay higher loan premia but might also have better chances to find funding.
In contrast, a less closer monitoring and pricing to risks could rather lead to credit constraints which are likely to be less efficient. Now, I would like to draw your attention to the German venture capital market. The main virtue of venture capitalists is the combination of funding for high-risk projects with management support.