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Entrepreneurial innovations, competition and competition policy

Pehr-Johan Norbäck () and Lars Persson

European Economic Review, 2012, vol. 56, issue 3, 488-506

Abstract: We construct a model where an entrepreneur can innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition not only reduces the profits of entrants and the acquirer of the inventions in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.

Keywords: Entrepreneurial innovations; Competition; Competition policy (search for similar items in EconPapers)
JEL-codes: L10 L26 L40 O30 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Entrepreneurial Innovations, Competition and Competition Policy (2010) Downloads
Working Paper: Entrepreneurial Innovations, Competition and Competition Policy (2008) Downloads
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