Acquisitions, entry, and innovation in oligopolistic network industries

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

International Journal of Industrial Organization, 2014, vol. 37, issue C, 1-12

Abstract: In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the option of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively acquire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives and that network effects promote acquisitions over entry.

Keywords: Acquisitions; Entry; Network effects; Innovation; R&D (search for similar items in EconPapers)
JEL-codes: L10 L15 L26 L50 O31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Acquisitions, Entry and Innovation in Oligopolistic Network Industries (2016)
Working Paper: Entrepreneurial Innovations in Network Industries (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:37:y:2014:i:c:p:1-12

DOI: 10.1016/j.ijindorg.2014.07.003

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