Repeated innovations and excessive spin‐offs

Pierre Mella‐Barral and Hamid Sabourian

The Financial Review, 2024, vol. 59, issue 1, 155-179

Abstract: Firms can voluntarily create independent firms to implement their technologically distant innovations and capture their value through capital markets. We argue that when firms repeatedly compete to make innovations, there is inefficient external implementation of innovations and “excessive” creation of such firms. This inefficiency is most exacerbated in the early stages of an industry, when the number of firms is still limited.

Date: 2024
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