Acquisitions, Entry, and Innovation in Oligopolistic Network Industries

Reprint No. 2014:54

Author(s): Pehr-Johan Norbäck, Lars Persson and Joacim TågYear: 2014 Title: International Journal of Industrial Organization Volume (No.): 37 (November) Pages: 1–12
Online article (restrictions may apply)

In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs fromdeveloping newinnovations. 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.

Norbäck, Pehr-Johan, Lars Persson and Joacim Tåg (2014), "Acquisitions, Entry, and Innovation in Oligopolistic Network Industries". International Journal of Industrial Organization 37(November), 1–12.

Pehr-Johan Norbäck


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Lars Persson


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Joacim Tåg


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