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Animal Spirits and Entrepreneurial Innovation: Theory and Evidence

Author

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  • Angela Cipollone

    (LUISS Guido Carli University, Department of Economics and Finance)

  • Paolo Giordani

    (LUISS Guido Carli University, Department of Economics and Finance)

Abstract

This paper proposes and empirically tests a theory of entrepreneurial innovation to explain its high degree of concentration in space and time. In the model, a successful entrepreneurial project is the result of a search and matching process between entrepreneurs looking for funds and capitalists looking for new ideas to finance. The resulting strategic complementarity between them gives rise to a multiplier effect. Moreover, if complementarity is sufficiently strong, multiple equilibria arise, which can be ranked in terms of entrepreneurial activity. Using data from the European and the US business angels markets for the period 1996-2010, we show that (ii) a complementarity exists between business angels and the entrepreneurial projects submitted to them, and that (ii) the result of multiple equilibria is empirically plausible.

Suggested Citation

  • Angela Cipollone & Paolo Giordani, 2012. "Animal Spirits and Entrepreneurial Innovation: Theory and Evidence," Working Papers CASMEF 1210, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:casmef:1210
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    References listed on IDEAS

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    Cited by:

    1. Paolo Giordani, 2015. "Entrepreneurial finance and economic growth," Journal of Economics, Springer, vol. 115(2), pages 153-174, June.

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    More about this item

    Keywords

    Entrepreneurship; financing of innovation; search and matching; strategic complementarities; venture capital; business angels.;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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