Post-Investment Migration of Canadian Venture Capital-Backed New Technology-Based Firms

Cécile Carpentier and Jean-Marc Suret

CIRANO Working Papers from CIRANO

Abstract: Numerous innovative Canadian new technology-based firms migrate abroad when local venture capitalists exit. This article aims to determine how common this type of exit is, and to understand the motivations behind and the consequences of these migrations. We use a mixed-methodology approach, combining quantitative and qualitative evidence. At the market level, we find that nearly half of successful venture capital exits from Canadian firms result in migration. Using a pattern matching approach with 14 cases, we show that these migrations are motivated mainly by strategic considerations in the context of a small country with few strategic partners and a small market for innovative products. Acquired firms become truncated companies with declining activities. Only a small proportion of bought-out entrepreneurs reinvest in the local economy. This phenomenon probably has strong negative effects on the creation of new large technological firms and clusters.

Keywords: Migration; venture capital; exit; trade sale (search for similar items in EconPapers)
JEL-codes: G24 G28 L26 M13 (search for similar items in EconPapers)
Date: 2014-04-01
New Economics Papers: this item is included in nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2014s-27

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