Does Easy Start-Up Formation Hamper Incumbents' R&D Investment? A Theoretical and Empirical Analysis

This paper investigates, both theoretically and empirically, the implications that complementary assets needed for the formation of start-ups -- proxied by the ease of access to financial resources -- have on the innovative efforts of incumbent firms. In particular, we develop a theoretical model, highlighting a strategic incentive effect by which the innovative efforts of incumbent firms are decreasing in the availability of the complementary assets needed for the creation of a start-up. The empirical relevance of this effect is investigated by using firm level data drawn from the third Italian Community Innovation Survey covering the period 1998-2000. The results of our empirical analysis support our theory-based insights.