 Creative destruction and productive preemptive acquisitionsPehr-Johan Norbäck, Lars Persson and Roger Svensson Journal of Business Venturing, 2016, vol. 31, issue 3, 326-343 Abstract: We develop a model of entrepreneurial innovation for entry and sale into oligopolies suitable for welfare analysis. We show that the expected consumer welfare can be higher under commercialization by sale than under commercialization by entry despite increased market power in the product market. The reason is that when the quality of the invention is sufficiently high, preemptive bidding competition among incumbents drives the acquisition price above the entry value. Entrepreneurs who sell their inventions will then have a stronger incentive to develop high-quality inventions than entrepreneurs who aim at entering the product market. Incumbents are hurt by this creative destruction process ignited by the entrepreneurs and thus have an incentive to undertake research to block entrepreneurs' research activities. We show that incumbents' own research effort can reduce, but not eliminate, the entrepreneurs' incentives to innovate for entry or sale. Keywords: Preemption; Acquisitions; Entry; Entrepreneurship; Innovation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:31:y:2016:i:3:p:326-343 DOI: 10.1016/j.jbusvent.2016.03.001 Access Statistics for this article Journal of Business Venturing is currently edited by S. Venkataraman More articles in Journal of Business Venturing from Elsevier |
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