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Verifying High Quality: Entry for Sale

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Abstract

When and how do entrepreneurs sell their inventions? To address this issue, we develop an endogenous entry-sale asymmetric information oligopoly model. We show that lowquality inventions are sold directly or used for own entry. Inventors who sell post-entry use entry to credibly reveal information on quality. Incumbents are then willing to pay high prices for high-quality inventions to preempt rivals from obtaining them. Using Swedish data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under preemptive bidding competition, post entry.

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  • Norbäck, Pehr-Johan & Persson, Lars & Svensson, Roger, 2017. "Verifying High Quality: Entry for Sale," Working Paper Series 1186, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1186
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    Cited by:

    1. Svensson, Roger, 2020. "The Scientific Output of a Database on Commercialized Patents," Working Paper Series 1349, Research Institute of Industrial Economics.

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    More about this item

    Keywords

    Acquisitions; Innovation; Start-ups; Ownership; Patents; Verification; Quality;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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