Working Paper Series
Erika Färnstrand Damsgaard, Pehr-Johan Norbäck
Why Entrepreneurs Choose Risky R&D Projects - But Still Not Risky Enough
(), Lars Persson
() and Helder Vasconcelos
Abstract: Entrepreneurs face higher commercialization costs than
incumbents. We show that this implies that entrepreneurs will choose more
risky projects than incumbents, aiming to reduce their high expected
marginal commercialization cost. However, entrepreneurs may select too safe
projects from a social point of view, since they do not internalize the
business stealing effect. We also show that commercialization support
induces entrepreneurship but may lead to mediocre entrepreneurship by
inducing entrepreneurs to choose less risky projects, whereas R&D support
encourages entrepreneurship without affecting the type of entrepreneurship.
Using Swedish patent citation data, we find empirical support for
predictions of the model.
Keywords: Entrepreneurship; Innovation; Start-ups; Ownership; Breakthrough; Quality; (follow links to similar papers)
JEL-Codes: G24; L10; L20; M13; O30; (follow links to similar papers)
41 pages, September 18, 2012
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