Why Entrepreneurs Choose Risky R&D Projects – But Still Not Risky Enough

Reprint No. 2017:56

Author(s): Erika Färnstrand Damsgaard, Pehr-Johan Norbäck, Lars Persson and Helder VasconcelosYear: 2017 Title: Economic Journal Volume (No.): 127 (605) Pages: 164–199
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Preliminary version

This article examines how entrepreneurs and incumbents differ 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 differentiated, entrepreneurs will select projects that are too safe from a social point of view, since they do not internalise the business stealing effect on incumbents. Entry support induces entrepreneurs to choose safer projects, whereas R&D support encourages entrepreneurship without affecting the type of entrepreneurship.

Färnstrand Damsgaard, Erika, Pehr-Johan Norbäck, Lars Persson and Helder Vasconcelos (2017), "Why Entrepreneurs Choose Risky R&D Projects – But Still Not Risky Enough". Economic Journal 127(605), 164–199.

Pehr-Johan Norbäck


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An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.


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