Acquisitions of Start-ups by Incumbent Businesses A market selection process of “high-quality” entrants?

Martin Andersson and Jing Xiao

No 2014/19, Papers in Innovation Studies from Lund University, CIRCLE - Centre for Innovation Research

Abstract: We analyze the frequency and nature by which new firms are acquired by established businesses. Acquisitions are often considered to reflect a technology transfer process and to also constitute one way in which a “symbiosis” between new technology-based firms (NTBFs) and established businesses is realized. Using a micro-level dataset for Sweden in which we follow new entrants up to 18 years after entry, we show that acquisitions of recent start-ups are rare and restricted to a small group of entrants with defining characteristics. Estimates from competing risks models show that acquired start-ups, in particular by multinational enterprises (MNEs), stand out from entrants that either remain independent or exit by being much more likely to be spin-offs operating in high-tech sectors, having strong technological competence, and having weak internal financial resources. Our overall findings support the argument that acquisitions primarily concern NTBFs in market contexts where entry costs are large, access to finance is important and incumbents have high market power.

Keywords: acquisitions; post-entry performance; market selection; start-ups; new technology-based firms (NTBFs); innovation; competing-risk model; Sweden (search for similar items in EconPapers)
JEL-codes: G34 L22 L26 O32 O33 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-10-03
New Economics Papers: this item is included in nep-cfn, nep-com, nep-cse, nep-ent, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://wp.circle.lu.se/upload/CIRCLE/workingpapers/201419_Andersson_Xiao.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:lucirc:2014_019

Access Statistics for this paper

More papers in Papers in Innovation Studies from Lund University, CIRCLE - Centre for Innovation Research CIRCLE - Centre for Innovation Research, Lund University, PO Box 117, SE-22100 Lund, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Torben Schubert ().