Animal Spirits in Entrepreneurial Innovation: Theory and Evidence
AbstractThis paper proposes and empirically tests a theory of entrepreneurial innovation in order 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, whereby any exogenous shock has a magnified effect on the process of innovation. Moreover, if complementarity is sufficiently strong, multiple equilibria arise, which are characterized by different levels of entrepreneurial activity. Using data from the European and the US business angels markets for the period 1996-2010, we show that (i) 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 InfoPaper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CELEG with number 1201.
Date of creation: 2012
Date of revision:
Entrepreneurship; financing of innovation; search and matching; strategic complementarities; venture capital; business angels.;
Other versions of this item:
- Angela Cipollone & Paolo Giordani, 2012. "Animal Spirits and Entrepreneurial Innovation: Theory and Evidence," Working Papers CASMEF 1210, Dipartimento di Economia e Finanza, LUISS Guido Carli.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-INO-2012-09-09 (Innovation)
- NEP-PPM-2012-09-09 (Project, Program & Portfolio Management)
- NEP-SBM-2012-09-09 (Small Business Management)
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