Working Paper No. 867

Acquisitions, Entry and Innovation in Network Industries

Published: April 6, 2011Pages: 38Keywords: Acquisitions; Commercialization; Compatibility; Entry; Network effects; Innovation; R&D; Regulation.JEL-codes: L10; L15; L26; L50; L86; O31

Acquisitions, Entry and Innovation in Network Industries Pehr-Johan Norbäck, Lars Persson and Joacim Tåg

Why do so many high-priced acquisitions of entrepreneurial firms take place in network industries? We develop a theory of commercialization (entry or sale) in network industries showing that high equilibrium acquisition prices are driven by the incumbents' desire to prevent rivals from acquiring innovative entrepreneurial firms. This preemptive motive becomes more important when there is an increase in network effects. A consequence is higher innovation incentives under an acquisition relative to entry. A policy enforcing strict compatibility leads to more entry, but can be counterproductive by reducing bidding competition, thereby also reducing acquisition prices and innovation incentives.

Pehr-Johan Norbäck


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Lars Persson


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Joacim Tåg


Ph: +46 8 665 4524

Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

Sick of Inequality.jpg

In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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