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Acquisitions for Sleep

Author

Listed:
  • Norbäck Pehr-Johan
  • Persson Lars

    (Research Institute of Industrial Economics, Grevgatan 34, Stockholm10215, Sweden)

  • Olofsson Charlotta

    (Lund University and Research Institute of Industrial Economics, Grevgatan 34, Stockholm10215, Sweden)

Abstract

Within the policy debate, there is a fear that large incumbent firms buy small firms’ inventions to ensure that they are not used in the market. We show that such “acquisitions for sleep” can occur if and only if the quality of a process invention is small; otherwise, the entry profit will be higher than the entry-deterring value. We then show that the incentive for acquiring for the purpose of putting a patent to sleep decreases when the intellectual property law is stricter because the profit for the entrant then increases more than the entry-deterring value does.

Suggested Citation

  • Norbäck Pehr-Johan & Persson Lars & Olofsson Charlotta, 2020. "Acquisitions for Sleep," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-13, April.
    • Handle: RePEc:bpj:bejeap:v:20:y:2020:i:2:p:13:n:15
    DOI: 10.1515/bejeap-2019-0021
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    References listed on IDEAS

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    More about this item

    Keywords

    acquisitions; innovation; sleeping patents; IP law; ownership;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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