| Summary: |
Entrepreneurship and innovation have long been recognized as key determinants for economic development and growth. In addition,
and as highlighted by Baumol (2002, 2004), there has been a growing tendency for specialization in the society's innovation process:
firms of very modest size have been responsible for most breakthrough, pioneering innovations, while large established firms have
provided more routinized Research and Development (R&D), leading to inventions which are usually incremental developments of
existing technologies. This poses a number of interesting questions: (i) why is there this "division of the work" in the innovation
process?; (ii) when do incumbents "let" small independent innovators make the breakthrough inventions?; and (iii) why do small
independent firms (entrepreneurs), despite their comparative disadvantage in terms of size, embark on radical R&D projects
characterized by great uncertainties (i.e., low success probability) but high value in case of success?
In the extant literature, informational advantages and abilities have been suggested to explain why small independent innovators
bring breakthrough innovations to the market (see, Acs and Audretch (2005) and Scherer and Ross (1990) for overviews of the
literature). This research project plans to contribute to this literature by proposing a novel explanation for the different roles taken by
small and large firms in the innovation process which relies on the fact that small independent firms usually have to incur a higher
cost of commercializing an innovation than large established incumbent firms do. As Gans and Stern (2003, p. 333) highlight, "a key
management challenge is how to translate promising technologies into a stream of economic returns for their founders, investors and
employees. In other words, the main problem is not so much invention but commercialization." In particular, small size independent
innovators usually have little experience in the markets wh  |
Summary
Entrepreneurship and innovation have long been recognized as key determinants for economic development and growth. In addition,
and as highlighted by Baumol (2002, 2004), there has been a growing tendency for specialization in the society's innovation process:
firms of very modest size have been responsible for most breakthrough, pioneering innovations, while large established firms have
provided more routinized Research and Development (R&D), leading to inventions which are usually incremental developments of
existing technologies. This poses a number of interesting questions: (i) why is there this "division of the work" in the innovation
process?; (ii) when do incumbents "let" small independent innovators make the breakthrough inventions?; and (iii) why do small
independent firms (entrepreneurs), despite their comparative disadvantage in terms of size, embark on radical R&D projects
characterized by great uncertainties (i.e., low success probability) but high value in case of success?
In the extant literature, informational advantages and abilities have been suggested to explain why small independent innovators
bring breakthrough innovations to the market (see, Acs and Audretch (2005) and Scherer and Ross (1990) for overviews of the
literature). This research project plans to contribute to this literature by proposing a novel explanation for the different roles taken by
small and large firms in the innovation process which relies on the fact that small independent firms usually have to incur a higher
cost of commercializing an innovation than large established incumbent firms do. As Gans and Stern (2003, p. 333) highlight, "a key
management challenge is how to translate promising technologies into a stream of economic returns for their founders, investors and
employees. In other words, the main problem is not so much invention but commercialization." In particular, small size independent
innovators usually have little experience in the markets where their inventions will have to be commercialized, implying that they will
face much higher commercialization costs than incumbent established firms. This being the case, the main goal of the current
research project is then to investigate whether the existence of significant differences in commercialization costs will influence the
type of R&D conducted by the different players contributing to the innovation process. By so doing, this project expects to uncover a
different mechanism from previous findings for the empirical observation that small firms are responsible for a disproportionate share
of the major breakthrough innovations to date.
This research project will also conduct an analysis of the induced effects of different types of pro-entrepreneurial policies used in
practice. In the policy debate, it has been argued that the presence of entrepreneurs will increase the innovative activity in the
industry, thereby contributing to the economic growth of a country (see, for instance, OECD (1999)). A typical example of a proentrepreneurial
policy is R&D subsidies targeted to small and medium sized enterprises (SMEs). The current research project will use
the proposed theoretical model(s) to examine how such a policy affects not only firms' incentives to undertake R&D projects, but also
the type of research projects that will be conducted. Moreover, this research project will study the relative merits of this common
policy with respect to alternative policies aiming at facilitating and stimulating R&D and entrepreneurship.
Finally, a very rich dataset regarding patents granted to small f |