Success Breeds Success Locally: a Tale of Incubator Firms

  • Eren Inci
  • Published 2007

Abstract

This paper focuses on the pre-establishment period of start-ups in industrial districts. The industrial architecture is what I call a "rationed agglomeration" in which some entrepreneurs gather around an established …rm while other entrepreneurs in the same business stand alone. In a rationed agglomeration, I analyze the e¤ects of relations between established …rms, network entrepreneurs, and local …nanciers on the market prices of loans. I show that such relations improve the match of capital to ideas in the network even though the overall distribution of capital to ideas remains unchanged. This suggests that success breeds success in the networks of established …rms. The existence of networks overturns the claim that there are no motives to engage in information gathering in a simple market regime with information asymmetries. In particular, I show that there are market incentives for established …rms to decrease the information gap between network entrepreneurs and local …nanciers. Keywords: agglomeration; entrepreneur; dispersion; innovation; local …nanciers; networks; regional economies; project …nancing; signaling; start-up JEL Classi…cation: D82; G20; R12; L26 Tel.: 90-216-483-9340; fax : 90-216-483-9250. Address: Sabanci University FASS, Orhanli / Tuzla 34956 Istanbul TURKEY. E-mail address: ereninci@sabanciuniv.edu. This paper was initiated while I was visiting the Industrial Economics and International Management Department of the Center for European Economic Research (ZEW) in 2006. I am grateful to their hospitality and …nancial support. I have greatly bene…ted from discussions with Richard Arnott, Andy Newman, participants of the Cambridge-MIT Institute’s Workshop on Regional Innovation at the University of Cambridge (2006), the Annual Congress of the European Economic Association (2007), and the RICAFE2 Conference (2007). This research is …nancially supported by Paula and Daniel Greeley Award and Boston College Dissertation Fellowship Award. All errors are mine.

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Cite this paper

@inproceedings{Inci2007SuccessBS, title={Success Breeds Success Locally: a Tale of Incubator Firms}, author={Eren Inci}, year={2007} }