Collusion with Public and Private Ownership and Innovation

44 Pages Posted: 24 Oct 2017 Last revised: 23 Jan 2019

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 Vladimirov

University of Amsterdam Business School

Date Written: January 22, 2019

Abstract

We argue that, by enforcing the regular provision of vetted information, public ownership can help firms coordinate to avoid head-to-head competition. Such "collusion" opportunities increase profitability ex post, but could lead to time-inconsistency problems undermining innovation ex ante. We show that public ownership benefits firms for which innovation is either of limited importance --- so coordination on existing technologies is key --- or of first-order importance --- so coordination with rivals developing the same technology is key. Private ownership dominates for intermediately attractive innovation opportunities, where time inconsistency problems are prevalent. The predictions of our model 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, Collusion with Public and Private Ownership and Innovation (January 22, 2019). 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 Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

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