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Complementary Assets, Start-Ups and Incentives to Innovate

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Author Info
Luca Colombo () (DISCE, Università Cattolica)
Herbert Dawid () (Universität Bielefeld)

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Abstract

In this paper we examine in a game theoretic framework in how far market conditions facilitating start-up formation positively affect technical change and firms' profits. We consider a model in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to form a start-up. Market conditions, in particular the availability of complementary assets, influence whether new firms are created and determine expected profits for start-up-founders. Easy availability of complementary assets has the direct effect that the generation of start-ups, which leads to the diffusion and duplication of know-how, is fostered. However, incentives of incumbent firms to invest in R&D might be reduced because of the increased danger of knowledge loss through spin-out formation. We fully characterize the effects of an increase in the availability of complementary assets, demonstrating that under certain market conditions the effects on innovative activities and industry profits can be negative.

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Publisher Info
Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0080.

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Length: nn pages 28
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:ctc:serie3:ief0080

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Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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Related research
Keywords: Complementary Assets; Technical Change; R&D Effort; Startup;

Find related papers by JEL classification:
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Baccara, Mariagiovanna & Razin, Ronny, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," CEPR Discussion Papers 4466, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Hellmann, Thomas F., 2002. "When Do Employees Become Entrepreneurs?," Research Papers 1770, Stanford University, Graduate School of Business. [Downloadable!]
  3. Bharat N. Anand & Alexander Galetovic, 2000. "Weak Property Rights and Holdup in R&D," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 9(4), pages 615-642, December. [Downloadable!] (restricted)
  4. S. Klepper & S. Sleeper, 2002. "Entry by Spinoffs," Papers on Economics and Evolution 2002-07, Max Planck Institute of Economics, Evolutionary Economics Group.
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    Other versions:
  6. Pamela Mueller, 2007. "Exploiting Entrepreneurial Opportunities: The Impact of Entrepreneurship on Growth," Small Business Economics, Springer, vol. 28(4), pages 355-362, April. [Downloadable!] (restricted)
  7. Hans Gersbach & Armin Schmutzler, 2003. "Endogenous spillovers and incentives to innovate," Economic Theory, Springer, vol. 21(1), pages 59-79, 01. [Downloadable!] (restricted)
    Other versions:
  8. Audretsch, David B. & Feldman, Maryann P., 2004. "Knowledge spillovers and the geography of innovation," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 61, pages 2713-2739 Elsevier. [Downloadable!] (restricted)
  9. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March. [Downloadable!] (restricted)
  10. Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1989. "Entrepreneurship and the initial size of firms," Journal of Business Venturing, Elsevier, vol. 4(5), pages 317-332, September. [Downloadable!] (restricted)
  11. Michael S. Dahl & Christian Ø.R. Pedersen & Bent Dalum, 2003. "Entry by Spinoff in a High-tech Cluster," DRUID Working Papers 03-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
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  1. Maria Flavia Ambrosanio & Massimo Bordignon & Floriana Cerniglia, 2008. "Constitutional reforms, fiscal decentralization and regional fiscal flows in Italy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0084, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
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