Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104334
Authors: 
Haufler, Andreas
Norbäck, Pehr-Johan
Persson, Lars
Year of Publication: 
2011
Series/Report no.: 
Munich Discussion Paper 2011-10
Abstract: 
In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen by entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by entrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss offset provisions. This points to a basic trade-off be- tween the goals of raising competition in technology-intensive markets and the desire of governments to foster risky `breakthrough' innovations.
Subjects: 
business taxation
innovation
market entry
JEL: 
H25
L13
M13
O31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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