' signaling-driven investment, despite the risk of buying a bad innovation. We finally show at what point the presence of active …

aggressive development of a basic innovation by better informed venture-backed firms is used as a signaling device to enhance the … sale price of the innovation. We then show that incumbents can undertake early, preemptive, acquisitions to prevent such … signaling driven overinvestment, despite the risk of buying a non-productive innovation. Therefore, to exist in equilibrium …

. However, the best strategy for innovative entrepreneurs might be to make an early entry to signal innovation quality and …