Cooperation in the formative years: Evidence from small enterprises in Europe

• We examine factors that might affect young firm’s incentives to engage in cooperation.
• Larger and innovative firms are more likely to enter into collaboration.
• Firms participate in collaboration more as they perceive significant market risk.
• Firms cooperate as they perceive rapidly changing technology and proper IPR protection.
• Firms collaborate more when their counterparts are in the same country and sector.

We empirically analyze factors that might affect the willingness of young small enterprises in several European countries to participate in collaborative agreements. These factors include the characteristics of the firm, of the entrepreneurs, and of the market environment the firm operates in. Within this age group – the “formative” years between 2 and 8 – firms are more likely to engage in collaboration as they grow larger, they are more innovative, they are led by educated and network-experienced entrepreneurs, and they perceive significant market risk, rapidly changing technology, and adequate IPR enforcement. They are more likely to search for collaborative opportunities when their counterparts in the same country and sector tend to do the same.