Market Entry by Startups: The Effect of Market Competitiveness and Intellectual Property Rights Protection

This study posits that the level of market competitiveness is an important factor in determining the propensity of cooperation between startups and market incumbents in the commercialization of the technological innovations of startups in the host market. We present a formal model and provide empirical evidence that indicates that startups are more prone to cooperate with host-market incumbents in highly competitive and highly uncompetitive host markets than in moderately competitive ones, in the commercialization of their innovations. Importantly, our model and results further show that stronger protection of intellectual property rights for the startup technological innovations has a contingent effect—it encourages cooperation at low-to-medium levels of host market competitiveness, but encourages competition at medium-to-high levels of host market competitiveness.