Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/81173 
Year of Publication: 
2004
Series/Report no.: 
IUI Working Paper No. 626
Publisher: 
The Research Institute of Industrial Economics (IUI), Stockholm
Abstract: 
The starting point of this paper is that the exit of venture-backed firms often takes place through sales to large incumbent firms. We show that in such an environment, venture-backed firms have a stronger incentive to develop basic innovations into commercialized innovations than incumbent firms, due to strategic product market effects. In turn, this will increase the price for basic innovations, thereby triggering more basic innovations by entrepreneurs. Consequently, the presence of a venture capital market implies that more basic innovations are created and that these become better developed.
Subjects: 
Acquisitions
Entrepreneurship
Innovation
Venture Capital
JEL: 
G24
L10
L20
M13
O30
Document Type: 
Working Paper

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