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Verifying High Quality: Entry for Sale

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

Abstract

When and how do entrepreneurs sell their inventions? To address this issue, we develop an endogenous entry-sale asymmetric information oligopoly model. We show that low quality inventions are sold directly or used for own entry. Inventors who sell post-entry use entry to credibly reveal information on quality. Incumbents are then willing to pay high prices for high-quality inventions to preempt rivals from obtaining them. Using Swedish data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under preemptive bidding competition, post entry.

Suggested Citation

  • Norbäck, Pehr-Johan & Persson, Lars & Svensson, Roger, 2018. "Verifying High Quality: Entry for Sale," CEPR Discussion Papers 13173, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13173
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    References listed on IDEAS

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    More about this item

    Keywords

    Acquisitions; Innovation; ownership; patents; Quality; start-ups; Verification;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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