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Complementary Assets, Start-Ups and Incentives to Innovate

Author

Listed:
  • Luca Colombo

    () (DISCE, Università Cattolica)

  • Herbert Dawid

    () (Universität Bielefeld)

Abstract

In this paper we examine in a game theoretic framework in how far market conditions facilitating start-up formation positively affect technical change and firms' profits. We consider a model in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to form a start-up. Market conditions, in particular the availability of complementary assets, influence whether new firms are created and determine expected profits for start-up-founders. Easy availability of complementary assets has the direct effect that the generation of start-ups, which leads to the diffusion and duplication of know-how, is fostered. However, incentives of incumbent firms to invest in R&D might be reduced because of the increased danger of knowledge loss through spin-out formation. We fully characterize the effects of an increase in the availability of complementary assets, demonstrating that under certain market conditions the effects on innovative activities and industry profits can be negative.

Suggested Citation

  • Luca Colombo & Herbert Dawid, 2008. "Complementary Assets, Start-Ups and Incentives to Innovate," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0080, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie3:ief0080
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sandro Brusco & Luca Colombo & Umberto Galmarini, 2010. "Local Governments Tax Autonomy, Lobbying, and Welfare," Department of Economics Working Papers 10-01, Stony Brook University, Department of Economics.
    2. Maria Flavia Ambrosanio & Massimo Bordignon & Floriana Cerniglia, 2010. "Constitutional Reforms, Fiscal Decentralization and Regional Fiscal Flows in Italy," Chapters,in: The Political Economy of Inter-Regional Fiscal Flows, chapter 4 Edward Elgar Publishing.
    3. Luca Colombo & Herbert Dawid & Kordian Kabus, 2012. "When do thick venture capital markets foster innovation? An evolutionary analysis," Journal of Evolutionary Economics, Springer, vol. 22(1), pages 79-108, January.
    4. Giuseppe Mastromatteo, 2011. "H.P. Minsky And Policies To Countervail Crises," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0102, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    5. repec:kap:sbusec:v:49:y:2017:i:3:d:10.1007_s11187-017-9900-8 is not listed on IDEAS
    6. Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    7. Colombo, Luca & Dawid, Herbert & Piva, Mariacristina & Vivarelli, Marco, 2013. "Does Easy Start-Up Formation Hamper Incumbents' R&D Investment? A Theoretical and Empirical Analysis," IZA Discussion Papers 7302, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Complementary Assets; Technical Change; R&D Effort; Startup;

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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