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Entrepreneurial Innovations, Competition and Competition Policy

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  • Norbäck, Pehr-Johan

    ()
    (Research Institute of Industrial Economics)

  • Persson, Lars

    ()
    (Research Institute of Industrial Economics)

Abstract

We show that, in the case when innovations are for sale, increased product market competition, captured by reduced product market profits, can increase the incentives for innovations. The reason is that the incentive to innovate depends on the acquisition price which, in turn, might increase despite firms in the market making lower profits. We also show that stricter, but not too strict, merger and cartel policies tend to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation and by increasing the relative profitability of being the most efficient firm in the industry. Moreover, it is shown that increased intensity of competition can increase the relative profitability of innovation for sale, relative to innovation for entry.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 670.

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Length: 47 pages
Date of creation: 22 Sep 2006
Date of revision: 05 May 2010
Handle: RePEc:hhs:iuiwop:0670

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Keywords: Acquisitions; Entrepreneurship; Innovation; Competition;

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References

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Citations

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Cited by:
  1. Daniel Chiquiar & Manuel Ramos Francia, 2009. "Competitiveness and Growth of the Mexican Economy," Working Papers 2009-11, Banco de México.
  2. Gans , Joshua & Persson, Lars, 2013. "Entrepreneurial Commercialization Choices and the Interaction between IPR and Competition Policy," Working Papers 2012:16, Swedish Entrepreneurship Forum.
  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, 2007. "Asymmetric Collusion and Merger Policy," Working Paper Series 719, Research Institute of Industrial Economics.
  5. Ganslandt, Mattias & Persson, Lars & Vasconcelos, Helder, 2008. "Asymmetric Cartels - a Theory of Ring Leaders," CEPR Discussion Papers 6829, C.E.P.R. Discussion Papers.

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