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Entrepreneurial innovations, competition and competition policy

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  • Norbäck, Pehr-Johan
  • Persson, Lars

Abstract

We construct a model where an entrepreneur can innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition not only reduces the profits of entrants and the acquirer of the inventions in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 3 ()
Pages: 488-506

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:488-506

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Keywords: Entrepreneurial innovations; Competition; Competition policy;

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Citations

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Cited by:
  1. Joshua S. Gans & Lars Persson, 2013. "Entrepreneurial commercialization choices and the interaction between IPR and competition policy," Industrial and Corporate Change, Oxford University Press, vol. 22(1), pages 131-151, February.
  2. Mattias Ganslandt & Lars Persson & Helder Vasconcelos, 2007. "Asymmetric Collusion and Merger Policy," Working Papers 28, Portuguese Competition Authority.
  3. Norbäck, Pehr-Johan & Persson, Lars & Tag, Joacim, 2012. "Buying to Sell: Private Equity Buyouts and Industrial Restructuring," CEPR Discussion Papers 8992, C.E.P.R. Discussion Papers.
  4. Ganslandt, Mattias & Persson, Lars & Vasconcelos, Helder, 2008. "Asymmetric Cartels - a Theory of Ring Leaders," CEPR Discussion Papers 6829, C.E.P.R. Discussion Papers.
  5. Daniel Chiquiar & Manuel Ramos Francia, 2009. "Competitiveness and Growth of the Mexican Economy," Working Papers 2009-11, Banco de México.

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