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Animal Spirits and Entrepreneurial Innovation: Theory and Evidence

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  • Angela Cipollone

    ()
    (LUISS Guido Carli University, Department of Economics and Finance)

  • Paolo Giordani

    ()
    (LUISS Guido Carli University, Department of Economics and Finance)

Abstract

This paper proposes and empirically tests a theory of entrepreneurial innovation to explain its high degree of concentration in space and time. In the model, a successful entrepreneurial project is the result of a search and matching process between entrepreneurs looking for funds and capitalists looking for new ideas to finance. The resulting strategic complementarity between them gives rise to a multiplier effect. Moreover, if complementarity is sufficiently strong, multiple equilibria arise, which can be ranked in terms of entrepreneurial activity. Using data from the European and the US business angels markets for the period 1996-2010, we show that (ii) a complementarity exists between business angels and the entrepreneurial projects submitted to them, and that (ii) the result of multiple equilibria is empirically plausible.

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Bibliographic Info

Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CASMEF with number 1210.

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Date of creation: 2012
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Handle: RePEc:lui:casmef:1210

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Keywords: Entrepreneurship; financing of innovation; search and matching; strategic complementarities; venture capital; business angels.;

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  13. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
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