Template-Type: ReDIF-Paper 1.0
Author-Name: Luca Colombo
Author-X-Name-First: Luca
Author-X-Name-Last: Colombo
Author-Email: lucava.colombo@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica
Author-Name: Herbert Dawid 
Author-X-Name-First: Herbert
Author-X-Name-Last: Dawid
Author-Email: hdawid@wiwi.uni-bielefeld.de
Author-Workplace-Name: Universität Bielefeld

Title: Complementary Assets, Start-Ups and Incentives to Innovate 
Abstract: In this paper we examine in a game theoretic framework in how far
market conditions facilitating start-up formation positively
affect technical change and firms' profits. We consider a model in
which R&D efforts of an incumbent firm generate technological
know-how embodied in key R&D employees, who might use this
know-how to form a start-up. Market conditions, in particular the
availability of complementary assets, influence whether new firms
are created and determine expected profits for start-up-founders.
Easy availability of complementary assets  has the direct effect
that the generation of start-ups, which leads to the diffusion and
duplication of know-how, is fostered. However, incentives of
incumbent firms to invest in R&D might be reduced because of the
increased danger of knowledge loss through spin-out formation. We
fully characterize the effects of an increase in the availability
of complementary assets, demonstrating that under certain market
conditions the effects on innovative activities and industry
profits can be negative.

Length: nn pages 28
Creation-Date: 2008-04

File-URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0080.pdf
File-Format: Application/pdf
File-Function: First version, 2008
Number: ief0080
Classification-JEL: L20, M13, O30
Keywords: Complementary Assets, Technical Change, R&D Effort, Startup
Handle: RePEc:ctc:serie3:ief0080