Verifying High Quality: Entry for Sale
Lars Persson and
Roger Svensson ()
No 13173, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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
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Working Paper: Verifying High Quality: Entry for Sale (2017)
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