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

Erika Färnstrand Damsgaard, Per Hjertstrand, Pehr-Johan Norbäck, Lars Persson and Helder Vasconcelos

Economic Journal, 2017, vol. 127, issue 605, F164-F199

Abstract: 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.

Date: 2017
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Citations: View citations in EconPapers (13)

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https://doi.org/10.1111/ecoj.12470

Related works:
Working Paper: Why Entrepreneurs Choose Risky R&D Projects - but still not risky enough (2016)
Working Paper: Why Entrepreneurs Choose Risky R&D Projects - But Still Not Risky Enough (2012)
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