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Acquisitions in a Patent Contest Model with Large and Small Firms

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  • Robin Kleer

Abstract

Big companies and small innovation factories possess different advantages in a patent contest. While large firms typically have a better access to product markets, small firms often have a superior R&D efficiency. In this paper I model a patent contest with asymmetric firms. In a pre-contest acquisition game large firms bid sequentially for small firms to combine respective advantages. Sequential bidding allows the first large firm to wait strategically and let the other firm acquire. For low efficiencies this leads to an asymmetric market structure even though the initial situation is symmetric. Furthermore, acquisitions increase the chances for a successful innovation.

Suggested Citation

  • Robin Kleer, 2008. "Acquisitions in a Patent Contest Model with Large and Small Firms," Working Papers 061, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:061_kleer
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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