Collusion with Public and Private Ownership and Innovation

47 Pages Posted: 24 Oct 2017 Last revised: 7 Aug 2018

See all articles by Arnoud W. A. Boot

Arnoud W. A. Boot

University of Amsterdam - Amsterdam Business School; Centre for Economic Policy Research (CEPR); Tinbergen Institute

Vladimir N. Vladimirov

University of Amsterdam Business School

Date Written: August 1, 2018

Abstract

We argue that, by enforcing the regular provision of vetted information, public ownership can help firms coordinate strategy to avoid head-to-head competition. Such "collusion" opportunities increase the profitability of existing technologies, but may hurt innovation incentives. We show that collusion opportunities benefit firms that either do not consider innovating attractive or consider innovating very attractive. For moderately attractive innovation opportunities, private ownership dominates. By making it harder to coordinate with rivals, private ownership helps firms overcome time inconsistency problems related to abandoning innovation too easily. Firms' incentives to grow are also affected. Our predictions shed light on several puzzling stylized facts.

Keywords: Public and Private Ownership, Innovation, Collusion

JEL Classification: G31, G32, L41, O31

Suggested Citation

Boot, Arnoud W. A. and Vladimirov, Vladimir N., Collusion with Public and Private Ownership and Innovation (August 1, 2018). Available at SSRN: https://ssrn.com/abstract=3057555 or http://dx.doi.org/10.2139/ssrn.3057555

Arnoud W. A. Boot

University of Amsterdam - Amsterdam Business School ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4162 (Phone)
+31 20 525 5318 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Vladimir N. Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

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