Paper #1011

Títol:

Entrepreneurial risk, investment and innovation

Autor:

Andrea Caggese

Data:

Desembre 2006

Resum:

In this paper I develop a general equilibrium model with risk averse entrepreneurial firms and with public firms. The model predicts that an increase in uncertainty reduces the propensity of entrepreneurial firms to innovate, while it does not affect the propensity of public firms to innovate. Furthermore, it predicts that the negative effect of uncertainty on innovation is stronger for the less diversified entrepreneurial firms, and is stronger in the absence of financing frictions in the economy. In the second part of the paper I test these predictions on a dataset of small and medium Italian manufacturing firms.

Paraules clau:

Entrepreneurs, Entrepreneurship, Innovation, Idiosyncratic Risk, Uncertainty, Incomplete Markets

Codis JEL:

M13, O31, D80

Àrea de Recerca:

Finances i Comptabilitat

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