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MASSACHUSETTS INSTITUTE OF TECHNOLOGY Legatum Center for Development & Entrepreneurship

THOUGHT LEADERSHIP

A collection of research published by MIT on global entrepreneurship

RESOURCE TYPE: Thought Leadership

Slack Time and Innovation

Ajay Agrawal
University of Toronto – Rotman School of Management; National Bureau of Economic Research (NBER)

Christian Catalini
Massachusetts Institute of Technology (MIT) – Sloan School of Management

Avi Goldfarb
University of Toronto – Rotman School of Management

Hong Luo
Harvard Business School – Strategy Unit

March 30, 2016

Rotman School of Management Working Paper No. 2599004

Abstract:
Traditional innovation models assume that new ideas are developed up to the point where the benefit of the marginal project is just equal to the cost. Because labor is a key input to innovation, when the opportunity cost of time is lower, such as during school breaks or time off from work, then such models predict that the number of ideas developed will be greater, but the average quality will be lower due to the lower expected value of marginal ideas. However, we posit that slack time such as school breaks may be qualitatively different than work time because contiguous blocks may be particularly beneficial for working on complex projects. We present a model incorporating this idea that predicts that although more ideas will be produced during slack time, they will have higher average complexity and perhaps even higher average value. Using data on 165,410 projects posted on Kickstarter (2009-2015), we report findings consistent with the model’s predictions.

Number of Pages in PDF File: 37

Keywords: crowdfunding, entrepreneurship, slack time, internet

JEL Classification: L26, O31, J22

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