This paper investigates, both theoretically and empirically, the implications

that complementary assets needed for the formation of start-ups - proxied by the

ease of access to financial resources - have on the innovative efforts of incumbent

firms. In particular, we develop a theoretical model, highlighting a strategic in-

centive effect by which the innovative efforts of incumbent firms are decreasing

in the availability of the complementary assets needed for the creation of a start-

up. The empirical relevance of this effect is investigated by using firm level data

drawn from the third Italian Community Innovation Survey covering the period

1998-2000. The results of our empirical analysis support our theory-based insights.