Entrepreneurs and new ideas

We study how early-stage new ideas are turned into successful businesses. Even promising ideas can be unprofitable if they fail on one dimension, such as technical feasibility, correspondence to market demand, legality, or patentability. To screen good ideas, the entrepreneur needs to hire experts w...

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Bibliographic Details
Published in:The Rand journal of economics 2008-12, Vol.39 (4), p.1105-1125
Main Authors: Biais, Bruno, Perotti, Enrico
Format: Article
Language:English
Subjects:
Analysis
Business innovation
Business strategies
Business structures
Business studies
Business success
Businesspeople
Cash flow
Collaboration
Creativity
Economic models
Entrepreneurs
Entrepreneurship
Experts
Information sharing
Intellectual property law
Investment policy
Knowledge management
Management
Net present value
Partnerships
Studies
Technological innovation
Working papers
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Summary:We study how early-stage new ideas are turned into successful businesses. Even promising ideas can be unprofitable if they fail on one dimension, such as technical feasibility, correspondence to market demand, legality, or patentability. To screen good ideas, the entrepreneur needs to hire experts who evaluate the idea along their dimensions of expertise. Sharing the idea, however, creates the risk that the expert would steal it. Yet, the idea-thief cannot contact any other expert, lest he should in turn steal the idea. Thus, stealing leads to incomplete screening and is unattractive if the information of the other expert is critical and highly complementary. In such cases, the entrepreneur can form a partnership with the experts, thus granting them the advantage of accessing each other's information. Yet, very valuable ideas cannot be shared because it is too tempting to steal them.
ISSN:0741-6261
1756-2171
DOI:10.1111/j.1756-2171.2008.00052.x