Early Entry to Verify Quality Stimulates Breakthrough Innovations

4 Pages Posted: 18 Sep 2020

See all articles by Pehr-Johan Norbäck

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Roger Svensson

Research Institute of Industrial Economics (IFN)

Date Written: March 5, 2019

Abstract

Most OECD-countries provide financial subsidy programs to stimulate the entry and growth of small entrepreneurial firms. However, the best strategy for innovative entrepreneurs might be to make an early entry to signal innovation quality and overcome asymmetry problems. Thereby, entrepreneurs can induce a preemptive bidding competition among incumbents and receive a higher acquisition price. This stimulates entrepreneurs to develop breakthrough innovations that will raise welfare.

Keywords: Acquisitions, Innovation, Start-ups, Ownership, Patents, Verification, Quality

JEL Classification: G24, L1, L2, M13, O3

Suggested Citation

Norbäck, Pehr-Johan and Persson, Lars and Svensson, Roger, Early Entry to Verify Quality Stimulates Breakthrough Innovations (March 5, 2019). Available at SSRN: https://ssrn.com/abstract=3663996 or http://dx.doi.org/10.2139/ssrn.3663996

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Roger Svensson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
+46-8-6654549 (Phone)
+46-8-6654599 (Fax)

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