Working Paper: NBER ID: w20559
Authors: Joshua S. Gans
Abstract: In a dynamic environment where underlying competition is "for the market," this paper examines what happens when entrants and incumbents can instead negotiate for the market. For instance, this might arise when an entrant innovator can choose to license to or be acquired by an incumbent firm; i.e., engage in cooperative commercialization. It is demonstrated that, depending upon the level of firms' potential dynamic capabilities, there may or may not be gains to trade between incumbents and entrants in a cumulative innovation environment; that is, entrants may not be adequately compensated for losses in future innovative potential. This stands in contrast to static analyses that overwhelmingly identify positive gains to trade from such cooperation.
Keywords: No keywords provided
JEL Codes: O31; O32; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| dynamic capabilities of firms (D25) | negotiation outcomes (C78) |
| lower dynamic capabilities of entrants (L15) | future innovative potential losses (O39) |
| cooperative commercialization (O36) | loss of future innovative rents for entrants (O36) |
| competition (L13) | better outcomes for entrants (I24) |
| licensing agreements (L24) | negative gains from trade for entrants (F11) |