Mella-Barral, P., Sabourian, H.

Repeated Innovations and Excessive Spin-Offs

CWPE2347

Abstract: Firms can voluntarily create independent firms to implement their technologically distant innovations and capture their value through capital markets. We argue that when firms repeatedly compete to make innovations, there is inefficient external implementation of innovations and “excessive” creation of such firms. This inefficiency is most exacerbated in the early stages of an industry, when the number of firms is still limited.

Keywords: Repeated Innovations, Spin-Offs, Voluntary Firm Creation

JEL Codes: M13 O31 O33

Author links: Pierre Mella-Barral  Hamid Sabourian  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2347.pdf

Open Access Link: https://doi.org/10.17863/CAM.104874

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