The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists

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

No 5449, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Exit of venture-backed firms often takes place through sales to large incumbent firms. We show that in such an environment, venture-backed firms have a stronger incentive to develop basic innovations into commercialized innovations than incumbent firms, due to strategic product market effects. This will increase the price for basic innovations, thereby triggering more such innovations by entrepreneurs. Consequently, a venture capital market implies that more innovations are created, and that these become better developed. Moreover, we show that to exist in equilibrium, venture capitalist must be substantially more efficient, otherwise incumbents will preempt venture capitalists entering the market by acquiring basic innovations

Keywords: Acquisitions; entrepreneurship; Innovation; Venture capital (search for similar items in EconPapers)
JEL-codes: G24 L1 L2 M13 O3 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-ent, nep-fin, nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists, and Oligopolists (2009)
Working Paper: The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists (2009)
Working Paper: The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists, and Oligopolists (2004)
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