Entrepreneurship, Teamwork and the Commercialization of Ideas

Entrepreneurs are often advised to team up with other people in order to increase the chances to commercialize their ideas. Less known is the mechanism through which this occurs, and whether there is empirical evidence on the veracity of this advice and the measurement of the returns to team up with others. Understanding teamwork, however, matters for economic policy and business strategy. Without such knowledge, it is likely that existing economic policy addressed at promoting collaboration between entrepreneurs and partners is not optimal. The paper estimates the value added of teaming up with others for the commercialization of ideas. Estimating the effect of teaming up in the probability of commercialization and in the returns of commercializing ideas is subtle. It is subtle because teaming up in a project is endogenous to the quality of the project. For instance, partners are more likely to team up with better projects in order to compensate their opportunity cost of providing technical skills, social capital and financial resources. Similarly, entrepreneurs with quality projects are more likely to be financially constrained, and consequently they seek financial help through partners to commercialize their ideas. In our context, an implication of the endogeneity problem is that the fact that projects with teams have higher probability and larger profits is not only reflecting the value added of partners, but also captures that entrepreneurs with better projects are more likely to seek partners and that partners prefer to team up with better projects. To separately identify the quality of the project from the value added by partners, we propose a structural model of teamwork. We estimate the parameters of the model using a survey of individual inventors based on the list of independent inventors from the Canadian Innovation Center.