|
on Technology and Industrial Dynamics |
| By: | Oliver Falck (Ifo Institute for Economic Research, CESifo and Max Planck Institute of Economics, Jna, Germany); Stephan Heblich (Max Planck Institute of Economics, Jena, Germany) |
| Abstract: | This paper takes a different perspective toward the escape entry incentive of incumbent firms to innovate. New entrants spawned from incumbents are not necessarily a threat; they can complement incumbents' production by commercializing knowledge incumbents are not willing or able to exploit. Accordingly, incumbent innovation determines exploitable knowledge externalities for spinoffs while, at the same time, spinoffs are expected to influence incumbent innovation. To overcome this problem of endogeneity, we apply an IV approach to analyze a rich industry-level dataset (1987–2000) for Germany. We find evidence that entry by spinoffs does, indeed, have a positive impact on incumbent innovation. |
| Keywords: | Innovation, Entry, Spinoff |
| JEL: | O3 L16 M13 |
| Date: | 2008–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2008-083&r=tid |
| By: | Bertrand, Olivier (Graduate School of Management of St Petersburg State University and Toulouse School of Economics); Nilsson Hakkala, Katariina (Helsinki School of Economics and Government Institute for Economic Research (VATT)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We analyze how the entry mode of Foreign Direct Investments (FDI) affects affiliate R&D activities. Using unique affiliate level data for Swedish multinational firms, we first present empirical evidence that acquired affiliates have a higher level of R&D intensity than greenfield (start-up) affiliates. This gap persists over time and with the age of the affiliates, as well as for different firm types and industries. To explain this finding, we develop an acquisition-investment-oligopoly model where we show that for a foreign acquisition to take place in equilibrium, the acquiring MNE must invest sufficiently in sequential R&D in the affiliate. Otherwise, rivals will expand their business, thus making the acquisition unprofitable. Two additional predictions of the model – that foreign firms acquire high-quality domestic firms and that the gap in R&D between acquired and greenfield affiliates decreases in acquisition transaction costs – are consistent with the data. |
| Keywords: | FDI; M&A; Multinational firms; R&D |
| JEL: | F23 L10 L20 O30 |
| Date: | 2008–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0772&r=tid |
| By: | Simon Wakeman (ESMT European School of Management and Technology) |
| Abstract: | This paper analyzes the strategic choices of a technology firm seeking to profit from innovation when the established product firms are better positioned to commercialize that innovation. While the predominant framework frames this as a choice between contracting and integration, this paper shows that in a context where the technology firm innovates repeatedly and has the opportunity to learn from its experience in the commercialization process, it may be optimal for the technology firm to pursue a hybrid between these two: contracting with a firm that possesses the complementary assets but retaining rights to participate in the commercialization process. The analysis is motivated by the experience of biotech firms, which in recent years have increasingly sought to retain the rights to participate in the marketing and sales stages of alliances with pharmaceutical firms (known as “co-promotion”). The paper develops a game-theoretic model of a technology firm choosing its strategy in this context, and uses the model to derive the conditions under which the firms will agree to a co-promotion (rather than a pure licensing) arrangement. It uses the model to explain the pattern of arrangements observed in biotech alliances, using a dataset of 565 alliances signed between U.S. biotech and pharmaceutical firms from 1992-2006. The results show that a firm is significantly more likely to enter a co-promotion arrangement when its technological expertise is focused on the product field of the alliance and when it is in a stronger financial position. |
| Date: | 2008–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-08-008&r=tid |