Verifying High Quality: Entry for Sale

Lars Persson, Norbäck, Pehr-Johan and Roger Svensson
Authors registered in the RePEc Author Service: Pehr-Johan Norbäck

No 13173, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Acquisitions; Innovation; Start-ups; Ownership; Patents; Verification; Quality (search for similar items in EconPapers)
JEL-codes: G24 L1 L2 M13 O3 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-com, nep-ent, nep-ind, nep-ino and nep-sbm
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Working Paper: Verifying High Quality: Entry for Sale (2017)
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