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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
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.:
- Jaffe, A.B. & Trajtenberg, M., 1992.
"Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations,"
14-92, Tel Aviv.
- Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
- Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," NBER Working Papers 3993, National Bureau of Economic Research, Inc.
- Diamond, Peter A, 1984.
"Money in Search Equilibrium,"
Econometric Society, vol. 52(1), pages 1-20, January.
- Vincenzo Verardi & Christophe Croux, 2009. "Robust regression in Stata," Stata Journal, StataCorp LP, vol. 9(3), pages 439-453, September.
- Lawrence H. Summers, 1989.
"Relative Wages, Efficiency Wages, and Keynesian Unemployment,"
NBER Working Papers
2590, National Bureau of Economic Research, Inc.
- Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-88, May.
- Jonathan Chiu & Cesaire Meh & Randall Wright, 2013.
"Innovation and growth with financial, and other, frictions,"
CQER Working Paper
2013-01, Federal Reserve Bank of Atlanta.
- Jonathan Chiu & Cesaire Meh & Randall Wright, 2011. "Innovation and growth with financial, and other, frictions," Working Papers 688, Federal Reserve Bank of Minneapolis.
- Jonathan Chiu & Césaire Meh & Randall Wright, 2011. "Innovation and Growth with Financial, and Other, Frictions," Working Papers 11-25, Bank of Canada.
- Jonathan Chiu & Cesaire Meh & Randall Wright, 2011. "Innovation and Growth with Financial, and other, Frictions," NBER Working Papers 17512, National Bureau of Economic Research, Inc.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
- Christian Keuschnigg, 2003.
"Optimal Public Policy For Venture Capital Backed Innovation,"
University of St. Gallen Department of Economics working paper series 2003
2003-09, Department of Economics, University of St. Gallen.
- Keuschnigg, Christian, 2003. "Optimal Public Policy for Venture Capital Backed Innovation," CEPR Discussion Papers 3850, C.E.P.R. Discussion Papers.
- Claudio Michelacci & Javier Suarez, 2004.
"Business Creation and the Stock Market,"
Review of Economic Studies,
Oxford University Press, vol. 71(2), pages 459-481.
- Michelacci, C. & Suarez, J., 2000. "Business Creation and the Stock Market," Papers 0009, Centro de Estudios Monetarios Y Financieros-.
- Claudio Michelacci & Javier Suarez, 2000. "Business Creation and the Stock Market," Econometric Society World Congress 2000 Contributed Papers 0673, Econometric Society.
- Michelacci, Claudio & Suarez, Javier, 2002. "Business Creation and the Stock Market," CEPR Discussion Papers 3513, C.E.P.R. Discussion Papers.
- Silveira, Rafael & Wright, Randall, 2010. "Search and the market for ideas," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1550-1573, July.
- 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.
- Robin Boadway & Oana Secrieru & Marianne Vigneault, 2005. "A Search Model of Venture Capital, Entrepreneurship, and Unemployment," Working Papers 05-24, Bank of Canada.
- repec:ner:ucllon:http://discovery.ucl.ac.uk/18641/ is not listed on IDEAS
- Henry Chen & Paul Gompers & Anna Kovner & Josh Lerner, 2009. "Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion," NBER Working Papers 15102, National Bureau of Economic Research, Inc.
- Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paolo Giordani).
If references are entirely missing, you can add them using this form.