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
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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

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