Start-up Acquisitions and Innovation Strategies

Armin Schmutzler, Igor Letina and Regina Seibel

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper provides a theory of strategic innovation project choice by incumbents and start-ups. We apply this theory to identify the effects of prohibiting start-up acquisitions. We differentiate between killer acquisitions (when the incumbent does not commercialize the acquired start-up's technology) and acquisitions with commercialization. A restrictive acquisition policy reduces the variety of research approaches pursued by the firms and thereby the probability of discovering innovations. Furthermore, it leads to strategic duplication of the entrant's innovation by the incumbent. These negative innovation effects of restrictive acquisition policy have to be weighed against the pro-competitive effects of preserving potential competition.

Keywords: innovation; acquisitions; mergers; competition; start-ups (search for similar items in EconPapers)
JEL-codes: G34 L41 O31 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cfn, nep-com, nep-cse, nep-ent, nep-ino and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224631

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