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Creative Destruction and Productive Preemption

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Author Info
Norbäck, Pehr-Johan () (Research Institute of Industrial Economics (IFN))
Persson, Lars () (Research Institute of Industrial Economics (IFN))
Svensson, Roger () (Research Institute of Industrial Economics (IFN))

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Abstract

We develop a theory of commercialization mode (entry or sale) of entrepreneurial inventions 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. Moreover, 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 detailed data on patents granted to small firms and individuals, we find evidence that high-quality inventions are often sold, and that they are sold under bidding competition.

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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 799.

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Length: 33 pages
Date of creation: 10 Jun 2009
Date of revision:
Handle: RePEc:hhs:iuiwop:0799

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Related research
Keywords: Acquisitions; Entrepreneurship; Innovation; Start-ups; Patent; Ownership; Quality;

Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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This page was last updated on 2009-11-25.

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