Being the best or being the only one – Dichotomous R&D strategy choices by startups aiming for acquisition

Joachim Henkel and Thomas Rønde

Journal of Economic Behavior & Organization, 2025, vol. 234, issue C

Abstract: We characterize optimal R&D strategies in a model where an incumbent and a startup with no possibility to enter the market choose both investment level and radicalness of their R&D projects. The incumbent commercializes the most valuable project, and, where necessary, acquires the startup. The startup has two locally optimal strategies: A “high quality” and a “low cost” strategy where it aims for having the most valuable and the only successful R&D project, respectively. The struggle for rents inside the innovation system results in an inefficient portfolio of projects compared to the R&D choices that a monopolist would make.

Keywords: R&D competition; Startup; Technology acquisition; Markets for technology; Game theory (search for similar items in EconPapers)
JEL-codes: C72 O31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:234:y:2025:i:c:s016726812500143x

DOI: 10.1016/j.jebo.2025.107024

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