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Verifying High Quality: Entry for Sale

Pehr-Johan Norbäck, Lars Persson and Roger Svensson ()

No 13173, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When and how do entrepreneurs sell their inventions? To address this issue, we develop an endogenous entry-sale asymmetric information oligopoly model. We show that low quality inventions are sold directly or used for own entry. Inventors who sell post-entry use entry to credibly reveal information on quality. Incumbents are then willing to pay high prices for high-quality inventions to preempt rivals from obtaining them. Using Swedish data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under preemptive bidding competition, post entry.

Keywords: Acquisitions; Innovation; ownership; patents; Quality; start-ups; Verification (search for similar items in EconPapers)
JEL-codes: G24 L1 L2 M13 O3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ent, nep-ind, nep-ino and nep-sbm
Date: 2018-09
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