Entrepreneurs and New Ideas

Enrico Perotti and Bruno Biais

No 3864, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Innovative ideas are novel combinations of productive resources potentially addressing an economic need (Schumpeter, 1926). Even promising ideas can be unprofitable if the proposed combination fails on at least one dimension, e.g., it is technically unfeasible or does not respond to a genuine customer need. To screen good ideas the entrepreneur needs to hire experts who evaluate the idea along their dimensions of expertise. Yet sharing the idea creates the risk that an expert would steal it. In this case, the idea-thief cannot contact any other expert, lest he should in turn steal the idea. Thus idea stealing leads to incomplete screening and is unattractive if the information of the other expert is critical or highly complementary. In such cases the entrepreneur can form a partnership with the experts. Yet very valuable ideas cannot be shared because it is too tempting to steal them.

Keywords: Entreprenuership; Innovation; Experts; Information aggregation; Venture capital; Ideas (search for similar items in EconPapers)
JEL-codes: G31 (search for similar items in EconPapers)
Date: 2003-04
New Economics Papers: this item is included in nep-cfn and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Entrepreneurs and new ideas (2008)
Working Paper: Entrepreneurs and New Ideas (2008)
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