Acquisitions, Entry and Innovation in Network Industries

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 867

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Firm Strategy, and Market Performance: General ; Information and Product Quality; Standardization and Compatibility ; Entrepreneurship ; Regulation and Industrial Policy: General ; Information and Internet Services; Computer Software ; Innovation and Invention: Processes and Incentives
• Subject: Acquisitions ; Commercialization ; Compatibility ; Entry ; Network effects ; Innovation ; R&D ; Regulation ; Übernahme ; Kommerzialisierung ; Netzwerkökonomik ; Innovation ; Regulierung ; E-Business ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Norbäck, Pehr-Johan ; Persson, Lars ; Tåg, Joacim
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/81358
• Last update: 10.03.2025, 11:41 AM CET