Working Paper: CEPR ID: DP14172
Authors: Lars Persson; Pehr-Johan Norbck; Charlotta Olofsson
Abstract: Within the policy debate, there is a fear that large incumbent firms buy small firms' inventions to ensure that they are not used in the market. We show that such "acquisitions for sleep" can occur if and only if the quality of a process invention is small; otherwise, the entry profit will be higher than the entry-deterring value. We then show that the incentive for acquiring for the purpose of putting a patent to sleep decreases when the intellectual property law is stricter because the profit for the entrant then increases more than the entry-deterring value does.
Keywords: acquisitions; innovation; sleeping patents; IP law; ownership
JEL Codes: G24; L1; L2; M13; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quality of invention (O31) | acquisition for sleep (G34) |
| quality of invention (O31) | entry profit for potential competitors (L13) |
| entry profit for potential competitors (L13) | acquisition for sleep (G34) |
| strictness of IP law (K11) | acquisition for sleep (G34) |
| strictness of IP law (K11) | profit for entrants (D26) |