Early Entry to Verify Quality Stimulates Breakthrough Innovations
4 Pages Posted: 18 Sep 2020
Date Written: March 5, 2019
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: Suggested Citation