Entry and Acquisitions in Software Markets

Luise Eisfeld
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Luise Eisfeld: University of Lausanne

No 25-93, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: New entry is thought to be the primary competitive margin in software markets. I study how acquisitions of venture capital-funded startups affect entry incentives. I assemble a product-level dataset of enterprise software and use text-as-data methods to define markets. I build and estimate a dynamic entry model where acquisitions affect returns to entry via (1) changes in market structure and (2) an entry-for-buyout incentive. In counterfactual simulations, banning all startup acquisitions reduces entry by about 16% in the average market, whereas blocking high-priced deals conducted by incumbents slightly raises entry. These results indicate which acquisitions might merit prioritized scrutiny.

Keywords: Mergers and Acquisitions; Antitrust; Entry; Startups; Enterprise Software; Innovation (search for similar items in EconPapers)
JEL-codes: G34 L22 L26 L49 L86 M13 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2025-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2593

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