Entrepreneurs Seeking Gains: Rational Motives in the Commercialization Decisions of Inventors

Direct individual-specific evidence on the profit motives of entrepreneurs has been lacking. Indeed, recent work suggests that entrepreneurship may be a non-profit-seeking activity, and that entrepreneurs evaluate risk oddly. In contrast, using direct prior measures of economic potential for inventions, we find that inventors respond sensibly to pecuniary incentives. We construct an empirically-relevant economic theory, with heterogeneous inventions and inventors, outside opportunities, sunk and non-sunk costs, and risk, to guide our investigation of the data. We collected assessment data from a center paid by inventors to assess their inventions' economic potential, and followed up with surveys to determine concrete economic outcomes. We find that inventors decide whether to commercialize their inventions (and later whether to exit) in a manner consistent with profit-seeking motives and risk aversion.