When to Sell Your Idea: Theory and Evidence from the Movie Industry
Harvard Business School - Strategy Unit
December 30, 2013
Harvard Business School Strategy Unit Working Paper No. 12-039
When to sell a novel idea is a difficult decision for many innovators. Selling early has financial benefits. But a later-stage sale of a more fully developed idea may attract greater buyer interest and allow the innovator to better protect his idea. I study the decision in a model that features a seller with private information and costly buyer participation. The empirical context of the study is the market for original movie ideas. Consistent with the theory, I find that inexperienced writers are excluded from selling early-stage ideas, restricting their choice to developing the idea fully or abandoning it. By contrast, writers who can attract buyers at any stage sell worse ideas earlier and better ideas later. The results have interesting implications not only for the timing of the sale of ideas, but also for the role of intellectual property protection and the value of intermediaries in the market for ideas.
Number of Pages in PDF File: 37working papers series
Date posted: November 30, 2011 ; Last revised: January 7, 2014
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