This Website uses cookies. By using this website you are agreeing to our use of cookies and to the terms and conditions listed in our data protection policy. Read more

Working Paper No. 867

Acquisitions, Entry and Innovation in Oligopolistic Network Industries

Working Paper
Reference
Norbäck, Pehr-Johan, Lars Persson and Joacim Tåg (2011). “Acquisitions, Entry and Innovation in Oligopolistic Network Industries”. IFN Working Paper No. 867. Stockholm: Research Institute of Industrial Economics (IFN).

Authors
Pehr-Johan Norbäck, Lars Persson, Joacim Tåg

In industries with network effects, incumbents’ installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the op- tion of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively ac- quire 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.
 

Pehr-Johan Norbäck

+46 (0)8 665 4522
+46 (0)73 574 3379
pehr-johan.norback@ifn.se

Joacim Tåg

+46 (0)8 665 4524
joacim.tag@ifn.se