Entry and Incumbent Innovation

25 Pages Posted: 14 May 2010

See all articles by Philipp Weinschenk

Philipp Weinschenk

University of Kaiserslautern; Max Planck Institute for Research on Collective Goods

Date Written: May 1, 2010

Abstract

We explore how the threat of entry influences the innovation activity of an incumbent. We show that the incumbent’s investment is hump-shaped in the entry threat. When the entry threat is small and increases, the incumbent invests more to deter entry, or to make it unlikely. This is due to the entry deterrence effect. However, when the threat becomes huge, entry can no longer profitably be deterred or made unlikely and the investment becomes small. Then the Schumpeterian effect dominates. These results turn out to be very robust.

Suggested Citation

Weinschenk, Philipp, Entry and Incumbent Innovation (May 1, 2010). MPI Collective Goods Preprint No. 2010/17, Available at SSRN: https://ssrn.com/abstract=1604385 or http://dx.doi.org/10.2139/ssrn.1604385

Philipp Weinschenk (Contact Author)

University of Kaiserslautern ( email )

Paul-Ehrlich-Straße 14
Kaiserslautern, D-67663
Germany

HOME PAGE: http://https://vwl-mikro.wiwi.uni-kl.de/team/prof-dr-philipp-weinschenk/

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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