Disclosure, Co-opetition, and Disruptive Investment

63 Pages Posted: 19 Jan 2021 Last revised: 28 Jun 2023

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; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2, 2023

Abstract

Do mandatory disclosure requirements make firms less disruptive and competitive? We propose a new theoretical framework showing that stricter disclosure requirements promote "co-opetition" --- a strategy of simultaneously cooperating and competing with rivals. In particular, stricter disclosure requirements facilitate implicit cooperation, helping firms avoid head-on competition in overlapping businesses. This results in higher profitability, which, in turn, stimulates competition by making financing disruptive investments easier. The downside of cooperating with rivals is that it may erode the commitment to pursuing disruptive investments. This problem primarily encumbers moderately attractive investment opportunities, leading to underinvestment in such opportunities. We study our theory's implications for whether innovative firms benefit from strategically patenting improvements to technologies where they overlap with rivals (which makes firms subject to strict disclosure) and the impact of this choice on the pursuit of disruptive investments. We provide empirical evidence from the enactment of stricter patenting disclosure requirements supporting the model's predictions.

Keywords: disclosure, competition, cooperation, co-opetition, public and private ownership, disruption, innovation.

JEL Classification: G31, G32, L41, O31

Suggested Citation

Boot, Arnoud W. A. and Vladimirov, Vladimir, Disclosure, Co-opetition, and Disruptive Investment (April 2, 2023). Available at SSRN: https://ssrn.com/abstract=3741208 or http://dx.doi.org/10.2139/ssrn.3741208

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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