Working Paper No. 1186

Verifying High Quality: Entry for Sale

Published: October 30, 2017Pages: 46Keywords: Acquisitions; Innovation; Start-ups; Ownership; Patents; Verification; QualityJEL-codes: G24; L10; L20; M13, O30

Verifying High Quality: Entry for Sale Pehr-Johan Norbäck, Lars Persson and Roger Svensson


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.

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
Mob: +46 73 547 3379
pehr-johan.norback@if...

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Roger Svensson

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Ph: +46 8 665 4549
Mob: +46 70 491 0166
roger.svensson@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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