This paper examines how entrepreneurs and incumbents di¤er in their R&D strategies. We show that entrepreneurs have incentives to choose projects with a higher risk and a higher potential in order to reduce expected entry costs. If products are not too di¤erentiated, entrepreneurs will select projects that are too safe from a social point of view, since they do not internalize the business stealing e¤ect on incumbents. Entry support induces entrepreneurs to choose safer projects, whereas R&D support encourages entrepreneurship without a¤ecting the type of entrepreneurship.
Why Entrepreneurs Choose Risky R&D Projects – But Still Not Risky Enough
Scientific Article in English