2017

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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Why Entrepreneurs Choose Risky R&D Projects – But Still Not Risky Enough Erika Färnstrand Damsgaard, Pehr-Johan Norbäck, Lars Persson and Helder Vasconcelos

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.

Reference:
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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Lars Persson

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lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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