Entrepreneurial Innovations, Competition and Competition Policy

44 Pages Posted: 12 Sep 2011

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)

Multiple version iconThere are 2 versions of this paper

Date Written: May 5, 2010

Abstract

We construct a model where an entrepreneur could innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition reduces entrants’ and acquirers’ profits in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents’ valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.

Keywords: Antitrust, Competition, Competition Policy, Entrepreneurs, Innovations

JEL Classification: L13, L40, O31

Suggested Citation

Norbäck, Pehr-Johan and Persson, Lars, Entrepreneurial Innovations, Competition and Competition Policy (May 5, 2010). Available at SSRN: https://ssrn.com/abstract=1926145 or http://dx.doi.org/10.2139/ssrn.1926145

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

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

Lars Persson (Contact Author)

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

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