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Acquisitions, entry, and innovation in oligopolistic network industries

Norbäck, Pehr Johan ; Persson, Lars LU and Tåg, Joacim LU (2014) In International Journal of Industrial Organization 37(1). p.1-12
Abstract

In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the option of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively acquire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives and that network effects promote acquisitions over entry.

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author
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Acquisitions, Entry, Innovation, Network effects, R&D, L10, L15, L26, L50, O31
in
International Journal of Industrial Organization
volume
37
issue
1
pages
12 pages
publisher
Elsevier
external identifiers
  • scopus:84905372957
ISSN
0167-7187
DOI
10.1016/j.ijindorg.2014.07.003
language
English
LU publication?
no
id
b0b80a81-e0e9-4265-abbf-77584bb1424f
date added to LUP
2020-01-23 15:54:54
date last changed
2020-01-24 15:17:31
@article{b0b80a81-e0e9-4265-abbf-77584bb1424f,
  abstract     = {<p>In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the option of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively acquire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives and that network effects promote acquisitions over entry.</p>},
  author       = {Norbäck, Pehr Johan and Persson, Lars and Tåg, Joacim},
  issn         = {0167-7187},
  language     = {eng},
  month        = {01},
  number       = {1},
  pages        = {1--12},
  publisher    = {Elsevier},
  series       = {International Journal of Industrial Organization},
  title        = {Acquisitions, entry, and innovation in oligopolistic network industries},
  url          = {http://dx.doi.org/10.1016/j.ijindorg.2014.07.003},
  doi          = {10.1016/j.ijindorg.2014.07.003},
  volume       = {37},
  year         = {2014},
}