The fierce growth in global competition has led politicians and economists in Italy to shift the focus of the debate to the pressing need for the country’s small firms to formulate appropriate strategic responses. In particular, the discussion has prompted the question of how best to ensure their survival: should these firms expand to a size that would enable them to tap into new markets through de novo entry strategies? Or should they pursue cooperation ventures with interested larger rivals? The paper seeks to contribute to the theoretical debate by illustrating a simple example, that of a small firm investigating the possibility of accessing a new market. Given that "made in Italy" companies leverage their competitive edge through the high quality of their products, we study when, in this context and in cases where potential licensing or other cooperation ventures are open to the firm, acquisition is preferable to a de novo entry plan.
Keywords: Acquisition, product innovation, vertical differentiation
Jel Code: L1, L2, O31