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Creative Destruction and Productive Preemption

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  • Norbäck, Pehr-Johan
  • Persson, Lars
  • Svensson, Roger

Abstract

We develop a theory of innovation for entry and sale into oligopoly, and show that an invention of higher quality is more likely to be sold (or licensed) to an incumbent due to strategic product market effects on the sales price. Preemptive acquisitions by incumbents are shown to stimulate the process of creative destruction by increasing the entrepreneurial effort allocated to high-quality invention projects. Using data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under bidding competition. Asymmetric information problems are shown to be solved by verification through entry for sale.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8281.

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Date of creation: Mar 2011
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Handle: RePEc:cpr:ceprdp:8281

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Keywords: Acquisitions; Entrepreneurship; Innovation; Ownership; Patent; Start-ups;

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References

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Citations

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Cited by:
  1. Bacache-Beauvallet, Maya & Bourreau, Marc & Moreau, François, 2011. "Portrait des musiciens à l'heure du numérique," Opuscules du CEPREMAP, CEPREMAP, number 22, May.
  2. Tarola, Ornella, 2013. "Acquisition vsus de novo entry: A theoretical appraisal," Research in Economics, Elsevier, vol. 67(2), pages 179-188.
  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. Norbäck, Pehr-Johan & Persson, Lars & Svensson, Roger, 2011. "Creative Destruction and Productive Preemption," CEPR Discussion Papers 8281, C.E.P.R. Discussion Papers.

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