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Creative Destruction and Productive Preemption

Lars Persson, Norbäck, Pehr-Johan and Roger Svensson
Authors registered in the RePEc Author Service: Pehr-Johan Norbäck ()

No 8281, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a theory of innovation for entry and sale into oligopoly, and show that an invention of higher quality is more likely to be sold (or licensed) to an incumbent due to strategic product market effects on the sales price. Preemptive acquisitions by incumbents are shown to stimulate the process of creative destruction by increasing the entrepreneurial effort allocated to high-quality invention projects. Using data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under bidding competition. Asymmetric information problems are shown to be solved by verification through entry for sale.

Keywords: Acquisitions; entrepreneurship; Innovation; Ownership; Patent; Start-ups (search for similar items in EconPapers)
JEL-codes: G24 L1 L2 M13 O3 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-com, nep-cta, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-mic, nep-ppm and nep-tid
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Working Paper: Creative Destruction and Productive Preemption (2014) Downloads
Working Paper: Creative Destruction and Productive Preemption (2013) Downloads
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