Why Entrepreneurs Choose Risky R&D Projects - But Still Not Risky Enough
AbstractEntrepreneurs face higher commercialization costs than incumbents. We show that this implies that entrepreneurs will choose more risky projects than incumbents, aiming to reduce their high expected marginal commercialization cost. However, entrepreneurs may select too safe projects from a social point of view, since they do not internalize the business stealing effect. We also show that commercialization support induces entrepreneurship but may lead to mediocre entrepreneurship by inducing entrepreneurs to choose less risky projects, whereas R&D support encourages entrepreneurship without affecting the type of entrepreneurship. Using Swedish patent citation data, we find empirical support for predictions of the model.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 926.
Length: 41 pages
Date of creation: 18 Sep 2012
Date of revision:
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Entrepreneurship; Innovation; Start-ups; Ownership; Breakthrough; Quality;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- 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; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-CFN-2012-09-30 (Corporate Finance)
- NEP-ENT-2012-09-30 (Entrepreneurship)
- NEP-INO-2012-09-30 (Innovation)
- NEP-IPR-2012-09-30 (Intellectual Property Rights)
- NEP-PPM-2012-09-30 (Project, Program & Portfolio Management)
- NEP-SBM-2012-09-30 (Small Business Management)
- NEP-TID-2012-09-30 (Technology & Industrial Dynamics)
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.:
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The RAND Corporation, vol. 33(2), pages 258-274, Summer.
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