Norbäck, Pehr-Johan; Persson, Lars - C.E.P.R. Discussion Papers - 2008
product competition tends to increase the relative profitability of innovation for sale relative to entry. Increased … competition reduces entrants' and acquirers' profits in a similar fashion, but also reduces the profit of non-acquirers. Therefore …, incumbents' valuations of innovations are less negatively affected by increased competition than entrants' profits. This, in turn …