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Preemptive acquisition and downgrading innovation

Author

Listed:
  • Ornella Tarola

    (DAES, UNIVERSITY OF ROME LA SAPIENZA)

Abstract

Research papers on innovation activity share the view that whenever an invention is made available by a startup innovator, getting its ownership by acquisition is beneficial for incumbent firms. In this note, I show by means of an example that there are some circumstances in which accomodating entry and competing with the innovator in the product market can be substantially more profitable than blocking her entry via acquisition.

Suggested Citation

  • Ornella Tarola, 2011. "Preemptive acquisition and downgrading innovation," Economics Bulletin, AccessEcon, vol. 31(2), pages 1520-1529.
    • Handle: RePEc:ebl:ecbull:eb-11-00295
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I2-P142.pdf
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    References listed on IDEAS

    as
    1. Jean Gabszewicz & Ornella Tarola, 2012. "Product innovation and firms’ ownership," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(4), pages 323-343, April.
    2. Cozzi Guido, 2007. "The Arrow Effect under Competitive R&D," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-20, January.
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    More about this item

    Keywords

    INNOVATION; VERTICAL DIFFERENTIATION; NATURAL DUOPOLY;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General

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