In this paper, we study the role of risk-sharing in entrepreneurship-driven innovation. Studying entrepreneurship and … innovation entails modeling an occupational choice and an effort choice. Risk-sharing may increase the number of individuals who … become entrepreneurs by limiting the downside risk. The effort of entrepreneurs may, however, be hampered by high risk …

. We also show that commercialization support induces entrepreneurship but may lead to mediocre entrepreneurship by … inducing entrepreneurs to choose less risky projects, whereas R&D support encourages entrepreneurship without affecting the … type of entrepreneurship. Using Swedish patent citation data, we find empirical support for predictions of the model …

incentives to choose projects with higher risk and a higher potential in order to reduce expected commercialization costs … business stealing effect. Commercialization support induces entrepreneurship but may lead to mediocre entrepreneurship by … inducing entrepreneurs to choose less risky projects, whereas R&D support encourages entrepreneurship without affecting the …