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Entrepreneurial risk, investment, and innovation

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  • Caggese, Andrea

Abstract

I estimate the effect of uncertainty on risky innovation using a panel of 11,417 manufacturing firms. I find that an increase in uncertainty has a large negative effect on the risky innovation of entrepreneurial firms, while it does not have any significant impact on other firms. This negative effect is stronger for the less diversified entrepreneurial firms in the sample. The estimation results are consistent with the innovation dynamics generated in a model in which entrepreneurs are risk averse and cannot diversify the risk of their business.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 106 (2012)
Issue (Month): 2 ()
Pages: 287-307

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Handle: RePEc:eee:jfinec:v:106:y:2012:i:2:p:287-307

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Precautionary saving; Entrepreneurial risk; Uncertainty; Innovation;

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Citations

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Cited by:
  1. Rui Castro & Gian Luca Clementi & Yoonsoo Lee, 2011. "Cross-Sectoral Variation in The Volatility of Plant-Level Idiosyncratic Shocks," NBER Working Papers 17659, National Bureau of Economic Research, Inc.
  2. Hvide, Hans K & Panos, Georgios, 2013. "Risk tolerance and entrepreneurship," CEPR Discussion Papers 9339, C.E.P.R. Discussion Papers.
  3. claudio Michelacci & Fabiano Schivardi, 2008. "Does Idiosyncratic Business Risk Matter?," EIEF Working Papers Series 0813, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2008.
  4. Dutz, Mark A., 2013. "Resource reallocation and innovation : converting enterprise risks into opportunities," Policy Research Working Paper Series 6534, The World Bank.
  5. Francisco Covas & Shigeru Fujita, 2007. "Private risk premium and aggregate uncertainty in the model of uninsurable investment risk," Working Papers 07-30, Federal Reserve Bank of Philadelphia.
  6. Christian Chiglino & Nicole Tabasso, 2014. "Risk Aversion in a Model of Endogenous Growth," School of Economics Discussion Papers 0314, School of Economics, University of Surrey.

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