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Success breeds success locally : a tale of incubator firms

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Author Info
Inci, Eren

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Abstract

This paper focuses on the pre-establishment period of start-ups in industrial districts. The industrial architecture is what I call a "rationed agglomeration" in which some entrepreneurs gather around an established firm while other entrepreneurs in the same business stand alone. In a rationed agglomeration, I analyze the e¤ects of relations between established firms, network entrepreneurs, and local financiers on the market prices of loans. I show that such relations improve the match of capital to ideas in the network even though the overall distribution of capital to ideas remains unchanged. This suggests that success breeds success in the networks of established firms. The existence of networks overturns the claim that there are no motives to engage in information gathering in a simple market regime with information asymmetries. In particular, I show that there are market incentives for established firms to decrease the information gap between network entrepreneurs and local financiers. --

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-71.

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Date of creation: 2006
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Handle: RePEc:zbw:zewdip:5465

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Related research
Keywords: agglomeration; entrepreneur; dispersion; innovation; local financiers; networks; regional economies; project financing; signaling; start-up;

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Find related papers by JEL classification:
L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
G20 - Financial Economics - - Financial Institutions and Services - - - 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. Eren Inci, 2007. "Occupational Choice and the Quality of Entrepreneurs," Boston College Working Papers in Economics 666, Boston College Department of Economics. [Downloadable!]
  2. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  3. Acs, Zoltán J & Audretsch, David B & Braunerhjelm, Pontus & Carlsson, Bo, 2006. "Growth and Entrepreneurship: An Empirical Assessment," CEPR Discussion Papers 5409, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Bates, Timothy, 2005. "Analysis of young, small firms that have closed: delineating successful from unsuccessful closures," Journal of Business Venturing, Elsevier, vol. 20(3), pages 343-358, May. [Downloadable!] (restricted)
    Other versions:
  5. Headd, Brian, 2003. " Redefining Business Success: Distinguishing between Closure and Failure," Small Business Economics, Springer, vol. 21(1), pages 51-61, August. [Downloadable!] (restricted)
  6. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December. [Downloadable!] (restricted)
    Other versions:
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  9. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-90, March. [Downloadable!] (restricted)
  10. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  11. Eren Inci, 2004. "A Model of R&D Tax Incentives," Boston College Working Papers in Economics 597, Boston College Department of Economics, revised 09 Oct 2006. [Downloadable!]
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