IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Acquisitions, Entry and Innovation in Oligopolistic Network Industries

In industries with network effects, incumbents’ installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the op- tion of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively ac- quire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives, and that network effects promote acquisitions over entry.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ifn.se/wfiles/wp/wp867.pdf
Download Restriction: no

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 867.

as
in new window

Length: 37 pages
Date of creation: 06 Apr 2011
Date of revision: 30 Nov 2016
Publication status: Published as Norbäck, Pehr-Johan, Lars Persson and Joacim Tåg, 'Acquisitions, Entry and Innovation in Network Industries' in International Journal of Industrial Organization, 2014, pages 1-12.
Handle: RePEc:hhs:iuiwop:0867
Contact details of provider: Postal:
Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jeffrey Church & Neil Gandal, 1993. "Equilibrium Foreclosure and Complementary Products," Industrial Organization 9311001, EconWPA.
  2. Norbäck, Pehr-Johan & Persson, Lars, 2005. "Investment Liberalization - Why a Restrictive Cross-Border Merger Policy can be Counterproductive," Working Paper Series 644, Research Institute of Industrial Economics.
  3. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000.
  4. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September.
  5. Joshua S. Gans & David H. Hsu & Scott Stern, 2000. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," NBER Working Papers 7851, National Bureau of Economic Research, Inc.
  6. Norbäck, Pehr-Johan & Persson, Lars, 2012. "Entrepreneurial innovations, competition and competition policy," European Economic Review, Elsevier, vol. 56(3), pages 488-506.
  7. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
  9. Pehr-Johan Norbäck & Lars Persson, 2009. "The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists, and Oligopolists," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1261-1290, December.
  10. Fabio Manenti & Ernesto Somma, 2008. "One-Way Compatibility, Two-Way Compatibility and Entry in Network Industries," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(3), pages 301-322.
  11. Ilya Segal & Michael D. Whinston, 2007. "Antitrust in Innovative Industries," American Economic Review, American Economic Association, vol. 97(5), pages 1703-1730, December.
  12. Gans, Joshua S. & Stern, Scott, 2003. "The product market and the market for "ideas": commercialization strategies for technology entrepreneurs," Research Policy, Elsevier, vol. 32(2), pages 333-350, February.
  13. Choi, Jay Pil, 1996. "Standardization and experimentation: Ex ante vs. ex post standardization," European Journal of Political Economy, Elsevier, vol. 12(2), pages 273-290, September.
  14. Church, Jeffrey & Gandal, Neil, 1996. "Strategic entry deterrence: Complementary products as installed base," European Journal of Political Economy, Elsevier, vol. 12(2), pages 331-354, September.
  15. Joseph Farrell & Garth Saloner, 1984. "Standardization, Compatibility and Innovation," Working papers 345, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Escribano, Alvaro & Fosfuri, Andrea & Tribó, Josep A., 2009. "Managing external knowledge flows: The moderating role of absorptive capacity," Research Policy, Elsevier, vol. 38(1), pages 96-105, February.
  17. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  18. Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization 9701002, EconWPA.
  19. Norbäck, Pehr-Johan & Persson, Lars & Svensson, Roger, 2011. "Creative Destruction and Productive Preemption," CEPR Discussion Papers 8281, C.E.P.R. Discussion Papers.
  20. Bruno Cassiman & Reinhilde Veugelers, 2006. "In Search of Complementarity in Innovation Strategy: Internal R& D and External Knowledge Acquisition," Management Science, INFORMS, vol. 52(1), pages 68-82, January.
  21. Mikhail Klimenko & Kamal Saggi, 2007. "Technical compatibility and the mode of foreign entry with network externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 176-206, February.
  22. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 504-520, Winter.
  23. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
  24. Luis Cabral & David Salant, 2008. "Evolving Technologies and Standards Regulation," Working Papers 08-16, New York University, Leonard N. Stern School of Business, Department of Economics.
  25. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
  26. Choi, Jay Pil, 1996. "Do converters facilitate the transition to a new incompatible technology? A dynamic analysis of converters," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 825-835, October.
  27. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
  28. Gerard Llobet & Michael Manove, 2006. "Network Size and Network Capture," Boston University - Department of Economics - Working Papers Series WP2006-007, Boston University - Department of Economics.
  29. David A. Malueg & Marius Schwartz, 2006. "COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 527-567, December.
  30. Joseph Farrell and Garth Saloner., 1989. "Converters, Compatibility, and the Control of Interfaces," Economics Working Papers 89-130, University of California at Berkeley.
  31. Joshua S. Cans & Scott Stern, 2000. "Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 485-511, December.
  32. Moldovanu, Benny & Jehiel, Philippe & Stacchetti, Ennio, 1997. "Multidimensional Mechanism Design for Auctions with Externalities," Papers 97-04, Sonderforschungsbreich 504.
  33. Joan Calzada & Tommaso M. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, vol. 118(531), pages 1223-1244, 08.
  34. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
  35. Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
  36. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
  37. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
  38. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  39. Jaehong Kim, 1993. "Fulfilled Expectations of Entry," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 681-695, Winter.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0867. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.